This is interesting stuff. Sterlite just did an end run around Grupo Mexico. As part of Sterlite's initial takeover bid for Asarco they bought the shortline railroad (owned by Asarco) which serves the Asarco mines.
Grupo Mexico obviously woke up to the significance of this move and ordered Asarco to block the sale via a petition to the STB. The STB just ruled against Asarco's petition:
Sterlite trains guns on Grupo Mexico, sweetens Asarco bid
By Staff Reporter 14 September 2009 @ 8:30 pm Mumbai - Sterlite Industries, the subsidiary of London-headquartered diversified mining group Vedanta Resources PLC has sweetened its offer for bankrupt US copper miner Asarco LLC nearly a fortnight after a US bankruptcy court recommended that Grupo Mexico be allowed to take control of Asarco as it was more likely to pay Asarco's creditors in full.
Sterlite, which is India's largest copper producer, said it has raised its bid for the Arizona-based 110 year-old miner Asarco to $2.56 billion in an all-cash deal, from $2.29 billion earlier, which included a $2.14 billion cash component and $208 million copper price participation note.
Sterlite has been facing off with Mexican miner Grupo Mexico for the assets of Asarco, which filed for bankruptcy in 2005 after being sued for $1.6 billion over environmental issues. Asarco, which owns three copper mines in Arizona and is the third largest copper producer in the US, was acquired by Grupo Mexico in 1999, but Grupo Mexico lacks control of Asarco's board as a result of the bankruptcy.
The new offer is ironically close to a $2.6 billion bid Sterlite made for Asarco in May 2008. Sterlite backed out of that deal last October, saying it needed a price cut after the copper markets dropped, sparking a long renegotiation between it and Grupo Mexico.
Sterlite said its sweetened offer was to provide for late and subordinate claims and to provide surplus cash after closing for the smooth continued operation of Asarco. It also said its raised bid is "at least an equal proposal" to Grupo Mexico's plan and perhaps superior as it has more support from Asarco's creditors.
Sterlite's plan is also supported by Asarco's union, which staged a long strike over wages and benefits while it was under Grupo Mexico's control before it filed for bankruptcy in 2005. Asarco has around 2500 employees.
However, Grupo Mexico owns 100 percent of Asarco's equity, which could make its bid difficult to top.
Last month, US Bankruptcy Judge Richard Schmidt in Texas recommended Grupo Mexico's bid of around $2.48 billion, which consisted of $2.20 billion in cash plus a $280 million promissory note to the creditors. His recommendation went to US District Judge Andrew Hanen, in Brownsville, Texas, who is expected to rule on the competing Sterlite and Grupo Mexico plans by November end.
According to market watchers, the sweetened offer means higher cash outgo but the acquisition would be beneficial for Sterlite as global copper prices have started to move up again and have topped $6000 per tonne from the earlier levels of $4000 per tonne. Asarco, which produced 237,000 tons of copper last year, owns mines that hold about 5 million metric tons of copper resources.
"I think Sterlite's move was somewhat surprising given that US District Court has already given the order, so after that they have gone ahead and raised this bid," said Apurva Shah, research head at Prabhudas Lilladher.