Asarco to Be Bought by India Copper Producer If Asbestos Liabilities Can Be Resolved

The bankrupt Asarco was bought by Sterlite Industries Ltd., the largest producer of copper in India, in an agreement to be finalized March 6, 2009. A completion of the buyout process was set pending the approval of the sale by a bankruptcy court in July 2009. An agreed-upon price was acknowledged by both Asarco and Sterlite, but the actual dollar amount was not made public as those discussing the matter with the media were not authorized to speak on the subject. Asarco missed an opportunity to be bought by Sterlite in 2008 when the Indian company offered $2.6 billion, and the price for the 2009 agreement was likely lower. The 65 percent drop in the price of copper reduced the budget available to Sterlite for the 2009 buyout of Asarco. An anticipated $1.5 billion is being discussed as a possible buyout price paid by Sterlite.

According to Jorge Lazalde, the attorney for Asarco’s parent company, Grupo Mexico SAB, creditors of Asarco would be surprised to get “cents on the dollar” for their claims. In order to allow for the completion of the buyout, Sterlite has agreed to extend its $50 million letter of credit it offered to Asarco in 2008. Should the deal not by completed by July 29, then Asarco can collect the $50 million. Grupo Mexico SAB, the parent company of Asarco, would benefit from the sale, as long as all asbestos liabilities are cleared. Should those liabilities be taken care of in the buyout, Grupo Mexico would no longer hold responsibility to compensate asbestos victims from Asarco. Asarco’s creditors were informed by Grupo Mexico that they could not be paid in full since the conditions led estimators to calculate Asarco’s worth at no more than $200 million. Most of the debts incurred by Asarco resulted from the damage to the environment and public health caused by its asbestos products. Government agencies and asbestos victims both held claims to a portion of the $5.2 billion they say Asarco owed them. Whether they will be paid from the buyout funds remained to be seen.