Vedanta Resources has made a $1.7 bn takeover bid for US based copper miner Asarco. Vedanta will be using Sterlite Industries for the bid. The deal is $1.1 bn in cash and $600 mn to be paid over the period of 9 years.
Sterlite has made a bid for Asarco for $2.6 bn when the commodity prices were at their peak. The copper price per tonne has reached a peak of $8940 per metric tonne and are no trading below $3000 per metric tonne.
However Sterlite has two problems to close the deal :
- Asarco has the right to look for a better bid. Which means there can be a repeat of Infosys-Axon-HCL bid.Remember Infosys has bid for Axon and HCL has offered a better price and took over Axon. Something like that can happen here.
- Asarco’s holding group Grupo Mexico was instrumental in fending of Vedanta’s earlier bid and it might do it again.
Sterlite will be acquiring the assets and not the liabilities. Asarco has many environmental regulatory concerns and the clean-up of the mess made by Asarco itself would cost the company few billions dollars. Sterlite will not be responsible for any of this. Sterlite has its own share of environmental concerns in India.
Once complete, this deal will make Sterlite one of the leading copper miners in the world. It has presence in India, Zambia and Australia. This deal will mark Sterlite’s North American entry. Asarco has 5 million tonnes of copper reserves and produced 235,000 tonnes of refined copper in 2007.
This deal will displace the Reliance RPL merger from the top 10 list of India’s all-time M&A’s. It also will tie-up with Suzlon Energy’s takeover of RePower which is also valued at $1.7 bn.
Top 10 M&A Deals in India so far :
- Tata Steel’s takeover of European steel major Corus for $12.2 billion.
- Vodafone’s purchase of 52% stake in Hutch Essar for about $10 billion.
- Hindalco of Aditya Birla group’s acquisition of Novellis for $6 billion.
- Ranbaxy’s sale to Japan’s Daiichi for $4.5 billion.
- ONGC acquisition of Russia based Imperial Energy for $2.8 billion.
- NTT DoCoMo-Tata Tele services deal for $2.7 billion.
- HDFC Bank acquisition of Centurion Bank of Punjab for $2.4 billion.
- Tata Motors acquisition of luxury car maker Jaguar Land Rover for $2.3 billion. UK government might actually fund this acquisition.
- Wind Energy premier Suzlon Energy’s acquisition of RePower for $1.7 billion.
- Reliance Industries taking over Reliance Petroleum Limited (RPL) for 8500 crores or $1.6 billion.
Another feather in the M&A cap for India.Come to think of it,India has supposedly made the best of the so called economic slowdown.Indians have gone agressive with their inorganic expansion strategies, and what probably made it easier was the dirt cheap valuations that were able to acquire companies.
Infact,Gmr’s energies acquisition earlier in the year 2008 paved the way of sorts,after GMR said they paid almost half the price they would have paid if the market conditions were right.
But,it will be interesting to know that now with Indian GDP shrinking considerably,will these buyouts bear fruit and the way the integration issues will be sorted out