Sterlite to acquire US-based Asarco

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Sterlite Industries (India) Limited, a subsidiary of London-based Vedanta Resources plc, on Saturday signed a definitive agreement with US-based Asarco LLC, a Tucson-based mining, smelting and refining company, to acquire substantially all the operating assets of the latter for a consideration of $2.6 billion. The asset acquisition will be financed by Sterlite through a mix of debt and existing cash resources.

When asked about the benefits arising out of the acquisition, Sterlite chairman Anil Agarwal told FE from New York, “This is a great opportunity for us, since Asarco is the third largest copper manufacturer in the US. We have been pursuing such kinds of opportunities, as is evident from our Balco and Hindustan Zinc acquisitions or the copper mines in Africa.”

Asarco, formerly known as American Smelting and Refining Company, is an over 100-year-old company and produced 235,000 tonne of refined copper in 2007. Asarco’s mines currently have estimated reserves of approximately 5 million tonne of contained copper. For the year 2007, Asarco had a total revenue of approximately $1.9 billion, Sterlite said in a statement.

On matters of integration, Agarwal stated, “Asarco is a 120-year-old company and has an immense clout in the US. Therefore, we will be retaining the name of the company.” He added that the company had filed for chapter 11 four years back, and Sterlite emerged the best bidder in a selection process that spanned several months. “Sterlite has a workforce of 3,000 people. We have only bought the assets of the company. We want to create long term value for our shareholders,” he said

The integrated assets to be acquired include three open-pit copper mines and a copper smelter in Arizona and a copper refinery, rod and cake plant and precious metals plant in Texas in the US.

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.

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 carefully 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.