Analysts say $900m would be right price for US miner.
Sterlite Industries, the country’s largest copper producer and a part of Anil Agarwal-owned Vedanta Resources Plc, is close to signing a contract to buy Asarco LLC, potentially ending the US miner’s four-year-old bankruptcy, two people involved in the talks said.
The companies have agreed on a dollar value for the sale of Asarco’s assets and other major points of a proposed contract, said the people, who declined to be identified because they aren’t authorised to speak on the subject. The contract may be signed within two weeks, they said.
Though a Sterlite official said the company is still in takeover talks with the beleaguered miner, he refused to give details. “We don’t want to comment on market rumours but at this point we just want to say that the discussions are still on,” the official added.
The official refused to comment on the price at which the Indian firm is negotiating with Asarco.
The official said, “We don’t know from where did the $2.1 billion re-bid price has come? It’s false and we are still negotiating.” He maintained that the revised offer is a fraction of the original offer.
Sterlite had withdrawn a $2.6 billion bid for Asarco in October saying changes in the copper market no longer justified the price. It said it would make a revised offer.
In January, Asarco’s parent Grupo Mexico, which is also trying to get back the control of the company, said that, given the current market situation, it would not offer more than $200 million for the US company.
Domestic analysts say that, given the current price of copper, Sterlite must not pay more than $900 million for the acquisition. “Given the current copper prices and base metals demand, paying anything above a billion dollars would have a negative impact on Sterlite,” an analyst said.
“Considering that the copper prices are down nearly 70% from its peak, around $900 million would be decent offer to acquire the miner,” another analyst added.
Spot copper prices on the London Metals Exchange have dropped from a high of $8900 per tonne in February last year to $3300 per tonne on Thursday.
And, analysts do not expect any major revival in prices in the next three quarters. “The deal is no more attractive as copper prices have plunged significantly. Even today, Asarco’s cost of production is around $3300 per tonne and it isn’t making profits. However, in the long run, Asarco may be advantageous for Sterlite,” an analyst said.
Sterlite shares fell 5.7% to close at Rs 263.40 on the Bombay Stock Exchange on Thursday. The stock gained 6% in the last month. (WITH BLOOMBERG)
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