Sterlite to buy Asarco's assets for $2.6 bn

Asarco had filed for bankruptcy and faces environment-related liabilities. Sterlite has ring-fenced itself against these liabilities and is just buying the copper mines, smelter and refinery of Asarco, said a senior Sterlite executive in Mumbai. 

The deal is subject to the approval of US Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, and the sale will conclude Asarco's Chapter 11 case. The assets were auctioned by the court through an open process, conducted by Lehman Brothers.

Asarco, known earlier as the American Smelting and Refining Company, is over 100-year old company and is today the third largest copper producer in the US. It produced 235,000 tonnes of refined copper in 2007.

The integrated assets to be acquired include three open-pit copper mines and a copper smelter in Arizona, US and a copper refinery, rod and cake plant and precious metals plant in Texas, US. 

Asarco's mines currently have estimated reserves of approximately 5 million tonnes of contained copper. For the year ended December 31, 2007, Asarco had total revenues of approximately $1.9 billion.

The asset acquisition will be financed by Sterlite through a mix of debt and existing cash resources. Sterlite will not acquire the cash and debt of Asarco nor assume its legacy liabilities for environmental claims.

"We are delighted to have reached agreement on this important acquisition, which is a significant milestone for our group," said Anil Agarwal, chairman, Sterlite. "The acquisition is in line with our stated strategy of leveraging our established skills," he added in the statement.

 "This agreement is a step forward in our quest to successfully emerge from Chapter 11," said Asarco's president and CEO Joseph F. Lapinsky.  "The sale will achieve the overall best value for Asarco, its employees, creditors and the local communities in which we operate," he added.

Asarco is a logical and strategic fit with Sterlite's existing copper business and provides it access to attractive mining assets with long life, diversification into the North American market; and an opportunity to develop Asarco's mines and plants.

The sale agreement resulted from a plan sponsor selection process in which Sterlite and several other entities participated over many months. Bidders submitted offers in late April and the selection of the highest and best bid occurred on Friday, 23 May 2008.

The selection process carefully followed a procedure supported by Asarco's creditors and approved by the bankruptcy court. An independent court-appointed examiner also closely observed the bidding process.

ABN AMRO corporate finance, a part of the RBS Group, acted as financial advisor and Shearman & Sterling acted as legal advisor to Sterlite in this transaction. Lehman Brothers acted as financial advisor and Baker Botts acted as legal advisor to Asarco in this transaction.

Asarco is an integrated copper mining, smelting and refining company with approximately 2,600 employees. The company operates mines, mills and a smelter in Arizona and a smelter and refinery in Texas.

Sterlite is India's largest non-ferrous metals and mining company with interests and operations in aluminium, copper and zinc and lead. It is a subsidiary of Vedanta Resources plc, a FTSE 100 metals and mining company.

Sterlite has copper smelter and refinery operations in India. Its main operating subsidiaries are Hindustan Zinc for its zinc and lead operations; copper mines in Australia; and Bharat Aluminium Company for its aluminium operations.

Sterlite, also listed on New York Stock Exchange, is in the process of setting up a 2,400-MW power plant through its wholly owned subsidiary, Sterlite Energy.

What Asarco brings for Sterlite

•  Access to attractive mining assets with long life
• Geographic diversification in the North American market; and
• Stable operating and financial platform for Asarco.
• Opportunity to develop Asarco's mines and plants