India’s Sterlite Buys Asarco

India’s Sterlite Industries, a subsidiary of Vedanta Resources, is buying the operating assets of US-based Asarco from Grupo Mexico for $1.1bn in cash and $600m in notes. The $600m senior secured non-interest bearing promissory note is payable over 9 years as follows: $20m per year from the end of second year for 7 years; and a terminal payment of $460m at the end of the ninth year, totaling $600m. In the event that the annual average of daily copper prices in a particular year increases beyond $6,000 a tonne, the annual payment in that year will be proportionately increased subject to a maximum of $66.67m and the terminal payment in the ninth year will be correspondingly reduced, keeping the total payment at $600m. LME copper close Friday at just over $3,700. The principal amount of the note will be adjusted for any variations in working capital on closing. The obligations under the note are secured against the assets being acquired and are without any recourse to Sterlite. The agreement is subject to the approval of the US bankruptcy court for the Southern District of Texas, Corpus Christi Division. The acquisition is on a cash free and debt free basis. Sterlite will assume operating liabilities but not legacy liabilities for asbestos and environmental claims for ceased operations. RBS Securities acted as financial advisor and Shearman & Sterling acted as legal advisor to Sterlite, while Barclays Capital and Baker Botts helped Asarco. Grupo Mexico bought Asarco in 1999 for $1.2bn. Asarco subsequently went bankrupt. Sterlite and Grupo Mexico have apparently been working on a deal for months.