Deal

Sterlite won't complete Asarco deal without price reduction

Sterlite Industries (India) Ltd. won't complete the $2.6 billion purchase of bankrupt copper producer Asarco LLC without a price reduction of “hundreds of millions of dollars,” lawyers said.

Because of the credit crisis and a drop in metal prices, Sterlite told Asarco it must cut its price, Asarco's lead bankruptcy lawyer, Jack Kinzie, said yesterday in a phone interview.

Asarco, based in Tucson, Arizona, was trying to sell itself to the Mumbai-based copper miner as part of a plan to reorganize and exit bankruptcy court protection. The companies will attend a court-ordered mediation session on Oct. 30 with Asarco's parent, Grupo Mexico SAB, which has proposed a competing, $2.7 billion reorganization plan, Kinzie said.

“There will be ongoing discussions between now and the 30th of October,” Kinzie said. “We will talk to the creditor constituencies and we will develop a strategy.”

Grupo Mexico attorney Luc Despins said that Asarco told U.S. Bankruptcy Court Judge Richard Schmidt about Sterlite's decision during a hearing yesterday in Texas. He declined to comment further. Grupo Mexico spokesman Juan Rebolledo declined to comment.

Sumanth Cidambi, associate director of investor relations for Sterlite, didn't immediately return a call seeking comment.

$7.9 Billion Claims

Creditors of Asarco, who claim to be owed as much as $7.9 billion, are voting on the two reorganization plans. Last month, lawyers for Grupo Mexico said none of the creditors had agreed to vote for its reorganization proposal. The company, acting through one of its other units, planned to try to persuade creditors to support it, lawyers said.

A Nov. 17 hearing to decide between Grupo Mexico's reorganization proposal and the Sterlite plan remains on the court's calendar, Kinzie said.

Grupo Mexico, which owns Asarco through its Americas Mining unit, lost control of the copper miner after placing it in bankruptcy in 2005. Grupo Mexico is the largest mining company in Mexico.

Environmental and asbestos creditors support Asarco's plan because it contains a settlement that would pay them at least $2.1 billion. Those creditors include government agencies trying to clean up pollution left behind by Asarco's mining activities and individuals who claim they were harmed by an Asarco affiliate's asbestos products. Those two groups claim they are owed $5.2 billion.

Grupo Mexico has offered to pay creditors in full to win back control of the company.

(Published by Bloomberg- October 15, 2008)