US Bankruptcy Judge Richard Schmidt said Grupo Mexico could give its reorganisation plan for Asarco, which filed for bankruptcy three years ago. The plan will be compared with Sterlite's offer and the court will approve the better proposal. "We are going to get both plans on track," said the judge and added that it is not going to be a race but will be an orderly process.
The judge approved a $52 million break-up fee and other protections sought by Sterlite in its bid for Asarco. The break-up or termination fee is commonly paid to a prospective purchaser if a contemplated transaction is not consummated.
It is intended to reimburse the disappointed purchaser for costs incurred during due diligence, which include time, resources, effort, lost opportunity costs and risks incurred. The break-up fee could be triggered by the acceptance of a rival bid by the Asarco board.
Sterlite sources said it is premature to comment. "A decision on questioning the order in a higher court will be taken after studying the order," sources added. The acquisition would have made Sterlite the world's third largest copper miner.
Sterlite had proposed a straight purchase of Asarco's assets for $2.6 billion. On May 30, Sterlite had emerged as the winner in a competitive bid that included Grupo Mexico, Swiss industrial conglomerate Glencore International AG, and a consortium of Harbinger Capital Partners and Citigroup Global Markets.
But the Mexican firm proposed to recapitalise Asarco at $4.1 billion, part of that amount coming from Asarco's own assets, with the rest as a cash infusion from Grupo Mexico.
Under the proposal made by a Grupo Mexico attorney in the federal bankruptcy court, the company would put up $2.7 billion, use $1 billion Asarco has on hand and then put in a further $440 million, if needed. Supporting this offer, Asarco board member H Malcolm Lovett Jr said the directors needed to evaluate Grupo Mexico's proposal.
Asarco owns three copper mines in Arizona and filed for bankruptcy protection in 2005 after it was sued for $1 billion over environmental clean-up and asbestos claims. An ongoing lawsuit at Brownsville in Texas could cost the company up to $11 billion, said sources.
After the ruling, Grupo Mexico vowed to win back control of Asarco in the competition and said in a statement, "Although we disagree with the court's ruling in granting bid protections to Sterlite Industries and we intend to appeal that decision, we are gratified that the court also recognised that we should have the right to file our own reorganisation plan and we are confident that our plan will ultimately be confirmed by the bankruptcy court."
Asarco's lawyer Jack Kinzie praised the judge's ruling saying, "Judge Schmidt's opinion was thorough and well reasoned. His approval of the Sterlite break-up fee sustains a process which will maximise the value of the assets for all interested parties."
