Vedanta arm takes Asarco bid to court

A long-running legal battle for a bankrupt US copper company has led Vedanta, the London-listed Indian miner, to enter a Texas courtroom this week with a raised cash offer. Vedanta, which produces copper and zinc in India, confirmed yesterday that its subsidiary Sterlite Industries had raised the cash portion of its bid for Asarco, the US copper miner, from $1.1bn to $1.59bn (£964m) in a court-mediated auction. If the move resolves the year-long legal battle, Vedanta will enter the US and South America as a copper producer, continuing a diversification drive. It has expanded to Zambia and Australia and has raised billions of dollars this summer to fund its move into the Indian electricity generation market. In its battle for Asarco, Sterlite is squaring up to Grupo Mexico, the Mexican mining conglomerate that bought Asarco in 1999. Grupo Mexico also raised its bid this week. It lost control of Asarco in 2005 when its subsidiary filed for bankruptcy, facing a miners' strike and an accumulation of asbestosrelated environmental lawsuits that by 2005 had topped $1bn. Asarco, a storied US miner founded more than a century ago as the American Smelting and Refining Company, has been mired in bankruptcy protection ever since. It is the centre of complex legal challenges that includes its own lawsuit against Grupo Mexico, alleging that its erstwhile parent stripped it of its best South American asset and crippled its potential to cope with its liabilities. Both Sterlite and Grupo Mexico have revised their bids several times over the past year, starting in October 2008 when Sterlite lowered its $2.6bn bid to $1.7bn in cash and notes, citing the crash in copper prices for its decreased offer. Grupo Mexico followed suit. Ownership of Asarco will probably be resolved by a Texas federal court later this month. The court will rule on Asarco's request to approve the sale to Sterlite. Sterlite's bid is backed by Asarco management and the Asarco miners' union. The value of Sterlite's bid has changed little, but it raised the cash component to please Asarco creditors. Its last revised bid was $1.1bn in cash plus $770m in notes. Now it is $1.59bn in cash plus $208m in notes. On Monday Grupo Mexico also raised its cash offer for the group from $1.46bn to $1.72bn. On top of that is a $280m note to cover environmental liabilities. Asarco owns three copper mines in Arizona. "This auction could result in Sterlite overpaying for what we consider to be higher cost tier two assets," said Michael Rawlinson, analyst at Liberum Capital. "However, we don't consider that Sterlite's revised offer constitutes a crazy price for Asarco." Vedanta shares fell 45p to £17.45. source:The Financial Times