Sterlite renegotiates Asarco takeover

Asks US firm to cut price as liquidity crisis mounts

MUMBAI: Copper producer Sterlite Industries India, a part of Vedanta Resources Plc, is renegotiating the price for its proposed $2.6 billion purchase of the US-based Asarco LLC, as global financial turmoil intensifies and copper prices continue to tumble. 

The Rio Tinto Group, the world’s second-largest iron-ore producer, may delay the
planned sale of $10 billion of assets this year and is also reviewing its spending timetable and project costs.

Rio had planned to sell $10 billion in assets this year to help pay for its $38.1 billion purchase last year of aluminium producer, Alcan Inc.

Asarco, based in Tucson, Arizona, was trying to sell itself to Sterlite as part of a plan to exit bankruptcy court protection.

“Acquirers will find it harder to source funds and even if they can source funds, they’ll have to pay more,” said Steve Robinson, a senior investment manager with Sydney-based Alleron Investment Management, which manages $839 million. “Given what’s happened with commodity markets, they may not find buyers prepared to pay a premium.”

A Sterlite spokesperson said, “In view of recent global situation and events affecting global financial markets as well as sudden drop in copper prices, we approached Asarco to rediscover the purchase price. Asarco said they will revert to us.”

A company official, however, said that during a hearing in the bankruptcy court on Tuesday, Asarco’s lawyer said that Sterlite is not pursuing the deal due to funding issues.

But the Sterlite spokesperson maintained that “the company has no issues with the funding plan and is on track to complete the acquisition by December provided the creditors vote in their favour”. The creditors of Asarco are scheduled to meet in November to discuss which company to support. A Sterlite official claimed that the creditors preferred Sterlite over the reorganisation plan offered by Grupo.

Asarco has copper mines in the US and Sterlite has interests in copper mining apart from other minerals. Sterlite had offered to acquire Asarco for $2.6 billion in May.

Last month, Grupo proposed a $2.7 reorganisation plan to win back the control of Asarco which it lost when the bankruptcy court established an independent board to run the company. Anil Agarwal, Chairman of Vedanta Resources said in September that the company will complete the acquisition of Asarco by December.

Rio had said last November it may sell as much as $30 billion of assets after increasing its long-term debt 19-fold through the Alcan acquisition. “We have not reviewed the target amount, we have simply reviewed the timetable,’’ Guy Elliott, chief financial officer, Rio said on Wednesday.

 shubhashish@dnaindia.net