Sterlite to buy US Asarco for $2.6 bn

Sterlite Industries (India) has signed an agreement to acquire US-based Asarco LLC for $2.6 billion (over Rs 10,000 crore) in cash...

Sterlite Industries (India) has signed an agreement to acquire US-based Asarco LLC for $2.6 billion (over Rs 10,000 crore) in cash, which would be the largest buyout abroad by an Indian company this year. Asarco, formerly known as American Smelting and Refining Company, is the third largest copper producer in the US and reported a revenue of around $1.9 billion for 2007. Sterlite would take six to seven months to complete the acquisition.

Asarco, which filed for bankruptcy protection in 2005, produced 2,35,000 tons of refined copper in 2007 and its mines have estimated reserves of 5 million tonnes (mt) of contained copper. The US company, which has 2,600 employees, operates mines, mills and a smelter in Arizona. It also has a smelter and refinery in Texas. Asarco president and CEO Joseph F Lapinsky said, “We are extremely pleased with this agreement…. Reaching this agreement with a world class mining company is a giant step forward in our quest to successfully emerge from Chapter 11 and the sale will achieve the overall best value for Asarco, its employees, creditors and the local communities in which we operate.”

The integrated assets to be acquired by Sterlite include three open-pit copper mines and a copper smelter in Arizona, as well as a copper refinery, rod and cake plant and precious metals plant in Texas. The asset acquisition is on a cash-free and debt-free basis. Sterlite will assume operating liabilities but not legacy liabilities for asbestos and environmental claims for ceased operations. “We are delighted to have reached an agreement on this important acquisition, which is a significant milestone for our group,” Sterlite chairman Anil Agarwal said in a release. It would be financed through a mix of debt and existing cash resources. The agreement is subject to the approval of the US Bankruptcy Court for the Southern District of Texas, Corpus Christi Division.

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 May 23, 2008. The selection process followed a procedure supported by Asarco’s creditors and approved by the US Bankruptcy Court for the Southern District of Texas. An independent court-appointed examiner also closely observed the bidding process. Asarco is a logical and strategic fit with Sterlite’s existing copper business and is expected to leverage the latter’s proven operational and project skills to develop and optimise the former’s mines and plants.

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