Asarco: Sterlite in pause mode

Font Size

Print

Feedback

Email

Discuss

Related Articles

Satyam to be stripped off Golden Peacock AwardPSU oil cos strike hit work at refineriesPSU oil cos strike hit work at refineriesTalks of buyout 'baseless': Satyam Comp

Mumbai, Jun 16: Metals giant Sterlite Industries—whose $2.6-billion deal for Asarco Llc has been rivalled by a reported $4.1-billion counter offer from the latter’s promoter, Grupo Mexico—probably won’t sweeten its bid at this time, feel experts.

Sterlite, a unit of London-listed Vedanta Resources, would prefer wait and watch until July 2 by when a federal bankruptcy court will decide if the bidder is entitled to a $50-million break-up fee should the deal fall through. The company may not want to put in a higher bid without a break-up fee clause in place.

Until that date, the board of Asarco is free to review any new bid that comes its way.

When asked whether Sterlite would increase its bid, a company spokesperson replied, “Sterlite has not yet taken any decision on this and, hence, it would not like to offer any comments.” Sterlite Industries shares rose 3.25%, or Rs 25.05, on Monday to close at Rs 795.45 on the BSE.Grupo Mexico said it would infuse $2.7 billion into Asarco, use $1 billion in Asarco’s hands, and pump an additional $440 million if needed. This came after an announcement by the parent firm earlier this month that it would do everything in its power to block the sale of its subsidiary to Sterlite. Grupo Mexico owns Asarco, but does not have board control of its subsidiary because of the latter’s bankruptcy.

According to a Mumbai-based investment banker, a few things are in Sterlite’s favour. It was the winning bidder in a competition that included Asarco’s estranged parent, Grupo Mexico, Swiss industrial conglomerate Glencore International AG, and a consortium of Harbinger Capital Partners and Citigroup Global Markets. Second is the break-up fee clause, where Asarco will pay close to $50 million if the deal falls through. Third, the workers’ union at Asarco seem to favour Sterlite.