"Sterlite acquires Asarco for record $2.6 billion"

Biggest overseas deal this yr; Vedanta Group co to become third largest miner
Our Bureau MUMBAI


Sterlite Industries (India) on Saturday announced the acquisition of Asarco Llc, a Tucson-based copper mining, smelting and refining company, for $2.6 billion in cash. This is the largest overseas purchase by an Indian company this year, overtaking Tata Motors’ acquisition of the marquee brands, Jaguar and Land Rover, from Ford for $2.3 billion. Post the deal, Sterlite will become the world’s third largest copper miner with a combined capacity of 650,000 tonnes a year.

Sterlite Industries, a part of the Vedanta group, signed a definitive agreement with Asarco to this effect on Saturday morning. The transaction, expected to be funded by internal accruals and borrowing, is subject to US Bankruptcy Court approval. Sterlite expects to conclude the formalities by September-October.

“We are delighted to have reached an agreement on this important acquisition, which is a significant milestone for our group,“ said Anil Agarwal, chairman of Sterlite Industries, which is now the world’s fifth largest copper miner with 400,000 tonnes capacity a year. Asarco is a logical and strategic fit with Sterlite’s existing copper business and is expected to create significant long-term value for all stakeholders through leveraging its proven operational and project skills to evolve and optimise Asarco’s mines and plants; access to attractive mining assets with long life; geographic diversification in the North American market; and stable operating and financial platform for Asarco, said Mr Agarwal.

He did not mention the exact amount of money it needs to borrow to fund the deal. He said Sterlite is a near zero debt company and therefore funding will be no issue. Sterlite has reserves of nearly $4.5 billion, he told ETover the phone from New York.
Sterlite has agreed to pay four times of EVA/EBITDA for the transaction which is amongst the lowest in the global mining space. Last year, Teckcominco bought Aur for a multiple of 6.6 times while Nordduetsche Affineire paid a multiple of 6.9 times for acquiring Cumiero. Also, Sterlite has a track record of turning companies around. The list includes Hindustan Zinc, Balco, Malco and assets in Zambia. The only exception is India Foils which it failed to put back on track and therefore sold it. Mr Agarwal said Asarco is in good financial position with an EBITDA of $650 million in 2007.

Asarco, formerly known as American Smelting and Refining Company, was put on the block after its creditors and trade unions filed for bankruptcy nearly a year ago.

Lehman Brothers acted as financial adviser and Baker Botts acted as legal adviser to Asarco in this transaction. Sterlite, which emerged as the highest bidder among many suitors, will only acquire the assets and absorb the “operating liabilities” and not the legacy liabilities for asbestos and environmental claims. Asarco’s operating liabilities are marginal, Sterlite officials said.

All bids were submitted in late April and the selection of the highest best bid occurred on May 23. Then the Sterlite team was called for further discussions. The Sterlite team was represented by Anil Agarwal, CFO Tarun Jain and representatives of ABN AMRO Corporate Finance, its financial adviser, and Shearman & Sterling, its legal adviser. The selection process followed a procedure supported by Asarco’s creditors and approved by the US Bankruptcy Court.

Sterlite said the copper production can be expanded, post the conclusion of the deal. The assets to be acquired include three openpit copper mines and a copper smelter in Arizona, US and a copper refinery, rod and cake plant and precious metals plant in Texas, US.

Asarco’s president and CEO Joseph F Lapinsky said: “Reaching this pact with a worldclass mining company is a giant step forward in our quest to successfully emerge from Chapter 11,” he said.

"Times Group buys UK’s Virgin Radio for Rs 448cr"

Sudeshna Sen LONDON

IN ITS first-ever overseas acquisition in the media space, The Times Group has acquired Virgin Radio Holdings Ltd and its subsidiaries in the UK from SMG Plc for a consideration of £53.2 million (around Rs 448.4 crore)

Virgin Radio, a music channel which operates under an FM licence in London and an AM licence in the rest of the UK, was acquired by TIML Golden Square Ltd, a wholly-owned subsidiary of Bennett Coleman & Company Ltd (BCCL), owners of leading media brands in India such as The Times of India and The Economic Times.

Virgin Radio, after a period of transition, will not retail the Virgin brand — giving it the freedom to develop its own mix of music and entertainment, without the branding parameters outlined by Virgin Enterprises. TIML, which will manage the station along with Irish company Absolute Radio, will invest £15 million in developing and re-launching the brand over the next few months. Virgin Enterprises will retain the brand for its own global radio strategy.

The acquisition is being seen as a key entry point into the vibrant British radio market as the new owners have closed the deal at almost a quarter of what SMG paid in 2000 — £225 million — to acquire the radio station. “This decision was arrived at collectively only after we all carefully considered the various options. I wish TIML all the best with their new radio brand,” said Richard Branson of the Virgin Group.

“I believe that £53.2 million represents a sound price for Virgin Radio and a good deal for SMG shareholders. I would like to wish the management team and all the employees of Virgin Radio the best of luck for the future and I am sure the business will continue to prosper under TIML’s ownership,” said Rob Woodward, chief executive of SMG Plc.

By autumn this year, the new owners will develop, working with Absolute Radio, a new music and entertainment brand, building on the work already achieved by the award-winning team at Golden Square.

“Now is a great period to be entering the UK market. We are pleased to be working with a great team of UK-based radio experts, Absolute Radio,” said A P Parigi, chief executive of TIML.

The BCCL group is India’s leading media conglomerate and owns a bouquet of media brands, with a large presence in radio, television, internet and entertainment.

"It’s Talk Time: RCom and MTN scribble share-swap fineprint"

Kausik Datta and Bodhisatva Ganguli MUMBAI


RELIANCE Communications’ (RCom) Indian minority shareholders may get the option to swap their shares with MTN at the same rate as its promoters, the Anil Dhirubhai Ambani Group (ADAG). Minority shareholders will of course have the conventional option of encashing their holding in RCom by participating in the open offer that may be launched by MTN.

This is one of the possibilities that RCom is weighing as it tries to strike a deal with MTN which, if successful, will create an entity with combined market capitalisation of $66 billion and with a presence in 23 countries. This is in line with RBI’s norms which allow spending of $50,000 by an individual in foreign markets a year. Indian minority shareholders hold 23% in RCom while foreign investors control of 11% stake. ADAG holds 66% equity in the country’s second largest private wireless telephone company.

Sources close to the development said a clearer picture of the deal has emerged in the past four days after the parties engaged in hectic parleys. MTN, sources say, they would sign an agreement to buy up to 74% in RCom — the maximum permissible foreign equity holding in an Indian telecom company. The proposed transaction involves two steps. The first step would a mandatory open offer for 20% for the minority shareholders. In the next stage, depending on the response to the open offer, Mr Ambani will swap his shares in RCom for MTN shares, enabling the latter to reach 74%.

This can be better explained with an example. Consider two extreme cases — one where the entire lot of foreign investors of RCom (11%) opt for the MTN open offer, and two when they stay away from it but the offer receives subscriptions from the Indian minority shareholders. In the first case, MTN’s holding in RCom, post the open offer, will be 11% and therefore, Mr Ambani will need to swap 63% of his RCom stake in MTN shares to enable the latter to reach the 74% FDI limit. The second scenario would help MTN end up with 20% stake, post the offer, while the existing foreign investors would continue to hold 11%. In this case Mr Ambani would exchange his 43% stake in RCom to get MTN shares. If there is no response to the open offer Mr Ambani would also swap a 63% stake in RCom to enable the latter reach 74%. In other words, MTN would end up getting between 63% and 74% of RCom equity, including the open offer, and Mr Ambani would give away anything between 43% and 63% stake in RCom to get MTN shares.

Ambani may pick up 34% in MTN

DEPENDING on the share-swap ratio, Mr Ambani is expected to pick up a 28-34% stake in MTN. But he would be by far be the single largest shareholder in MTN. He would not cross the 35% mark as Johannesburg’s rules demand an open offer beyond this figure.

Newshelf 664 is the largest shareholder of MTN with a 13.1% stake. The Beirut-based Mikati family holds 10.2% while PIC has a 9.7% stake. The rest 67.1% is widely held. Post the deal, the holding of these shareholders will come down as the equity capital of MTN will expand on account of issuance of new shares to the RCom shareholders and ADAG.

Some people feel that the share swap option may not elicit a good response from Indian minority shareholders. “It is difficult to expect many takers for the share swap offer. And frankly speaking, there is no reason why a minority shareholder should be attracted to trade on the Johannesburg Stock Exchange where MTN is listed,” said a banker. Some others, however, believe that the option may lure some investors. “Minority shareholders have invested in RCom because they believe in the company’s promoters. Now one does not know whether they would like to tag along with the promoters to Jo’burg as well,” said an analyst.

However, those who are not interested in the share swap would have the liberty to sell their shares in the MTN open offer. MTN will issue fresh shares to those who want to swap their holding in RCom, including Mr Ambani. The broad contours of the deal thus indicate that Mr Ambani will emerge as the largest shareholder of MTN and RCom will be it’s subsidiary , as reported in ET earlier.