US$1.1b Sterlite Asarco copper acquisition deal awaits federal court approval
The proposed $1.1 billion sale of U.S. copper miner Asarco to Vedanta subsidiary Sterlite Industries is now awaiting the approval of a federal bankruptcy judge in Corpus Christi, Texas.The agreement between Asarco and Sterlite calls for a cash payment of US$1.1 billion and a senior secured non-interest bearing promissory note for US$600 million, payable over a period of nine years.The terms of the agreement call for annual payments of US$20 million from the end of the second year for a period of seven years; and terminal payment of $460 million at the end of the ninth year. If average daily copper prices in a particular year exceeded US$6,000 per tonne, the annual payment will be proportionately increased subject to a maximum of $66.67 million.The operating assets to be sold include three copper mines, mills and SX-EW plants in Arizona; a copper smelter in Arizona; and a copper refinery, rod and cake plants and precious metals plants in Texas.Sterlite Industries is India’s largest non-ferrous metals miner with interests and operations in aluminum, copper, zinc and lead.Asarco said two letters of credit totaling $100 million for the benefit of Asarco secure the agreement. An additional $25 million letter of credit will be issued if the bankruptcy court approves the disclosure statement for Asarco’s reorganization plan. Sterlite Industries guarantees the purchaser’s performance under the new agreement. In return, Asarco will release Sterlite from any claims arising out of the first purchase and sale agreement signed in May 2008.Until the bankruptcy court approves certain portions of the new agreement, Asarco is allowed to solicit and negotiate other offers, according to Asarco.In a statement, Sterlite Chairman Anil Agarwal said, "This acquisition is in line with our strategy of leveraging our existing skills to become a diversified global copper producer and creating long term value for shareholders."Sterlite said the Asarco acquisition is expected to create "significant long term value for all stakeholders" through: • Access to attractive mining assets with long life; • Geographic diversification in the North American market; • Stable operating and financial platform for Asarco. • Leveraging Sterlite’s operational and project skills to develop and optimize Asarco’s mines and plants. "Reaching this agreement in such difficult economic times is a tribute to our Board of Directors and principal credit groups," said Joseph Lapinsky, president and CEO of Asarco. "It is satisfying to see months of negotiations finally bear fruit in an agreement that achieves value for all concerned."Asarco was previously owned by Grupo Mexico, which acquired the company in 1999. By 2007, Asarco sued Grupo, claimed the Mexican mega-miner plotted to gain control of Asarco’s most valuable assets, forcing Asarco to sell a $765 million stake in Southern Copper to Grupo subsidiary Americas Mining.The result, Asarco claimed, stripped the company of its assets and left Asarco to face billions of dollars in environmental and asbestos claims alone. Asarco declared bankruptcy in 2005.