New York: India’s Sterlite Industries and Mexican miner Grupo Mexico will take their battle for control of bankrupt US copper miner Asarco LLC to court on Monday, as Asarco seeks to put an end to its four-year bankruptcy.
Asarco, which sought court protection in 2005 amid a worker strike and more than $1 billion in environmental damage and asbestos claims, is asking judge Richard Schmidt of the US bankruptcy court in Corpus Christi, Texas to approve a sale of itself for more than $2 billion to Sterlite as part of its reorganization plan.
The move is opposed by Grupo Mexico, which acquired Asarco in a leveraged buyout in 1999, but lacks board control due to the bankruptcy. Grupo Mexico, the largest copper miner in Mexico, has submitted its own offer to regain control of Asarco, making a bid it says is worth $3.1 billion in cash and notes.
Judge Schmidt will hear evidence on the merits of both plans at the hearing. Asarco chief executive Joseph Lapinsky could be asked to testify during the proceedings.
A flood of Asarco’s creditors filed objections to Grupo Mexico’s plan last week. The company’s union, which supports the Sterlite deal, said Grupo’s plan was “inadequate” and that it is “very unlikely” it would be able to reach a labour agreement with the Mexican miner after months of “painstaking” negotiations.
Private equity fund Harbinger Capital, one of Asarco’s largest bondholders, had made an alternate $500 million reorganization plan offer for the company, but last week suspended consideration of its plan, saying it would support the Asarco-Sterlite deal.
An ultimate decision from judge Schmidt on Asarco’s fate would bring to an end a more than year-long international battle over the sale of the copper miner, which owns three mines in Arizona. The sale could offer significant repayment to many of the company’s creditors.
Sterlite had made a $2.6 billion offer for Asarco in May 2008, but backed out of that deal in October, saying it needed a substantial reduction in price after a drop in the copper markets. That also led Grupo Mexico to reduce its offer from an earlier $2.7 billion proposal that offered full repayment to creditors. Months of negotiation resulted in revised bids of $1.7 billion and $1.55 billion from Sterlite and Grupo, respectively, which were later pushed higher.
A key issue in the hearing this week will also be a US federal court decision earlier this year that found Grupo Mexico in 2003 had made a “fraudulent transfer” of Asarco’s “crown jewel,” a controlling stake in Peruvian miner Southern Copper Corp. Judge Andrew Hanen, who sits in US district court in Brownsville, Texas, found that Grupo Mexico should return the stake in Southern Copper to Asarco along with a cash payment, in a decision Asarco says is now worth about $7.5 billion.
Sterlite’s plan for Asarco envisions keeping that judgment, while under Grupo’s plan, it would be ineffective. Grupo is appealing the decision.
Grupo Mexico says its plan would offer more repayment to creditors and that it would pursue claims against Sterlite for backing out of its earlier deal.
Sterlite, an affiliate of London-listed Vedanta Resources Plc, has been promised a break-up fee should its offer not go through.
The case is In re: Asarco LLC, US bankruptcy court, Southern District of Texas, No. 05-21207.