Grupo Mexico Plans to Merge Units

Mining giant Grupo Mexico has announced it plans to merge its American Mining Corp. (AMC) unit with Southern Copper and Asarco. As part of the deal, Grupo Mexico says Southern Copper shareholders will get 1.237 shares of AMC common stock for each share of Southern Copper common stock held. Santander equity analyst Victoria Santaella says that while the deal values Asarco at $6.8bn, she believes the unit’s fair value is $3.4bn. She adds that the fusion is negative for Southern Copper shareholders. “We regard this transaction as expensive for Southern Copper stockholders as the value assigned to Asarco is very high . . . thus lowering the upside potential on the stock.” However, she says it is good news for Grupo Mexico’s investors, as the company is monetizing Asarco after regaining control of the company for less than $1bn 7 months ago. Actinver equity analyst Karla Pena says the deal is only “marginally positive” as the merger will only bring savings through streamlining of management. “Instead of having 2 separate entities with separate management teams, there will only be 1 management team now,” she explains. Morgan Stanley is acting as financial advisor and Skadden, Arps, Slate, Meagher & Flom is acting as legal counsel to Grupo México and AMC.