NRI billionaire Anil Agarwal-led Sterlite Industries said on Saturday that it has entered into an agreement with copper producer Asarco to buyout the US-based company for USD 1.1 billion in cash and promissory note worth USD 600 million. "Sterlite has signed a new agreement with Asarco for purchase of substantially all the operating assets of Asarco. The purchase consideration comprises a cash payment of USD 1.1 billion on closing; and a senior secured non-interest bearing promissory note for USD 600 million,payable over a period of nine years," Sterlite said in a statement. However,the agreement is subject to the approval of the US Bankruptcy Court for the Southern District of Texas,Corpus Christi Division,it added. The deal is expected to be closed by July-August this year. "We are happy that we have reached agreement with ASARCO on these new terms. 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," Vedanta Resources Group Chairman Anil Agarwal said. As per the deal,the assets Sterlite will acquire include three open-pit copper mines and associated mills and SX-EW in Arizona,a copper smelter in Arizona,and a copper refinery,rod and cake plants and a precious metals plant in Texas,USA,it said. Sterlite,India's leading copper producer,also said it will assume operating liabilities but not legacy liabilities for asbestos and environmental claims for ceased operations. The asset acquisition is on a cash free and debt free basis,it added. Giving the break-up of the USD 600 million worth promissory note,Sterlite said that USD 20 million per year from the end of the second year for a period of seven years will be paid to Asarco apart from a terminal payment of USD 460 million at the end of the ninth year. However,it added that the deferred payment through promissory note is subject to alterations in copper prices,which at present have gone down by about 60 per cent to about USD 3,500 a tonne mark on account of the global industrial downturn. "In the event that the annual average of daily copper prices in a particular year increases beyond USD 6,000 per tonne,the annual payment in that year will be proportionately increased subject to a maximum of USD 66.67 million and the terminal payment in the ninth year will be correspondingly reduced,keeping the total payment at USD 600 million. The principal amount of the Note will be adjusted for any variations in working capital on closing," it said. Sterlite added that the obligations under the Note are secured against the assets being acquired and are without any recourse to Sterlite. Last year in May,Sterlite Industries,the Indian arm of London-listed mining major Vedanta Resources Plc,had inked a definitive agreement to buyout Asarco. Sterlite was to fund the acquisition through a combination of debt and existing cash reserves. Asarco,formerly known as American Smelting and Refining Company,is a 110-year-old company and is the third largest copper producer in the US. It sold approximately 237,000 tonnes of refined copper in 2008. Asarco's mines currently have estimated reserves of 5 million tonnes of contained copper. For the year ended December 31,2008,Asarco had total revenues of nearly USD 1.9 billion and profit before tax of USD 393 million.
