Vedanta Group backed Sterlite has hiked its bid for assets of financially troubled US copper miner Asarco by around 27% to $2.3 billion to exceed the $2.2 billion bid by Grupo Mexico. Sterlite is now moving closer to its original bid of $2.6 billion for Asarco made last year.
Sterlite had since then revised the offer price in line with drop in copper prices but the bidding war with Mexican rival has forced it to sweeten the deal.
Grupo Mexico had raised its offer for Asarco to $2.2 billion in cash early this week. This also came with a $280 million one-year note. A US court judge is scheduled to make a recommendation in favour of either of the two bidders by the end of August.
Mexican company’s higher bid was in response to Sterlite’s revised cash offer to purchase the assets of Asarco. Sterlite had offered to pay $1.587 billion in cash in view of the recent increase in global copper prices and $208 million in the form of copper price participation note(which is basically money paid to smelters when prices exceed certain value).
Sterlite had then lowered value of the participation note as a part of the bid (from $770 million to $208 million) while raising the cash component. But the overall bid value had come down marginally to $1.798 billion as against $1.87 billion earlier.
Sterlite had earlier in June revised its offer to $1.87 billion from $1.7 billion and had, reportedly, said it was not looking to revise the price upwards.
Formed more than 100 years ago by consolidating a number of silver smelting companies, Asarco has over the years evolved into an integrated producer of copper and other metals.
As part of the new offer, Sterlite has raised the cash component by around $500 million to $2.1 billion while the participation note of $208 million remains unchanged. The Asarco attorney has disclosed that Sterlite’s bid involves guarantee to pay all unsecured debts of Asarco. Asarco’s liabilities are close to $3.6 billion, including principal outstanding of $3.1 billion and interest of $500 million. The US company has cash reserves of $1.4 billion.
As per the MoU signed in March’09, Sterlite has the right to match the best offer, in case the creditors find any other bid superior for Asarco. Moreover, Sterlite has the right to claim a break-up fee, if it fails to acquire Asarco.