Grupo Mexico wins back copper mining unit Asarco

A Texas judge has issued final approval of Grupo Mexico SAB's plan to regain control of copper miner Asarco LLC, ending a lengthy takeover battle with rival suitor Sterlite Industries.

The Mexico City-based conglomerate said Sunday that U.S. District Court Judge Andrew Hanen in Brownsville, Texas on Friday confirmed Grupo Mexico's plan to pay $2.2 billion to Asarco's creditors. The deal was previously recommended for approval by U.S. Bankruptcy Court Judge Richard Schmidt.

The ruling will return control of Asarco to Americas Mining Corp., a Grupo Mexico subsidiary. The deal is expected to close by mid-December.

Under the plan, Grupo Mexico will give $2.2 billion to Asarco to be distributed to creditors together with an estimated $1.4 billion in cash held by Asarco. Grupo Mexico also will guarantee a one-year note for $280 million payable to Asarco's asbestos creditors, forgive $161 million of Asarco tax obligations to Americas Mining, and release Americas Mining's claim to a $60 million tax refund that will, instead, remain with Asarco.

To finance the deal, a group of financial institutions has promised $1.4 billion in financing to Americas Mining along with Grupo Mexico's $800 million contribution.

Asarco, formerly known as American Smelting and Refining Co., is the third-largest copper producer in the U.S. The outcome involves Asarco's three Arizona mining operations and a Texas refinery placed in bankruptcy in August 2005 when the company ran out of cash and faced hefty environmental liability and potential asbestos-related claims.

Grupo Mexico lost control of Asarco shortly after the company filed for bankruptcy protection when independent directors were placed on the board. The company in August 2009 won a bankruptcy auction to take back its former unit, but a union for Asarco employees and the company's court-appointed management wanted another bidder, Mumbai-based Sterlite Industries Ltd., to have control.

Sterlite, a unit of London-based Vedanta Resources, originally offered $2.6 billion to buy Asarco out of bankruptcy court protection but lowered the offer to about $2.1 billion amid the recession. Schmidt on Aug. 31 recommended that Grupo Mexico be allowed to regain control over Asarco, saying that both companies' bids were likely to pay all creditors with full interest but that Sterlite's plan paid less equity and that Grupo Mexico's plan had a greater certainty of closing.

Sterlite then sweetened its offer to $2.57 billion in cash, but Schmidt said that bid should be disregarded because it came after the original deadline. Schmidt's recommendation then went to Hanen to make the final decision.

"While the path has not necessarily been as expedient or as unerring as some would have preferred, it has led all concerned to a point where the end, barring appeals, is now in sight," Hanen wrote in a 141-page ruling.

Hanen is the same judge who last year said Grupo Mexico was guilty of defrauding creditors by diverting copper owned by Asarco in Peru to another of its units. The conglomerate appealed that ruling. With this confirmation, however, Grupo Mexico will not have to pay the $6 billion in damages to Asarco and won't pursue the appeal.

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