Asarco joins Grupo Mexico

Asarco (AR-N) has terminated its merger agreement with Phelps Dodge (PD-N) and paid the required US$30-million breakup fee. The New York, N.Y.-based copper producer has instead accepted a cash proposal from Grupo Mexico.

The Mexican conglomerate won the bidding war for Asarco when Phelps Dodge failed to match its latest offer of US$29.75 per share.

Phelps Dodge offered US$14.75 in cash and 0.25 share, on a fully prorated basis, for each of Asarco’s 40 million outstanding shares. With receipt of the breakup fee, Phelps Dodge let its offer expire.

Asarco provisionally accepted Grupo Mexico’s offer in mid- October, allowing Phelps Dodge time to submit a better offer. However, the Oct. 23 deadline passed without an encouraging word from Phelps Dodge.

“We were simply unwilling to overpay for Asarco by raising our offer,” said Phelps Dodge Chairman Douglas Yearley.

Asarco and Grupo Mexico then inked the definitive merger agreement worth US$2.2 billion, including assumption of Asarco’s debt.

Grupo Mexico, Mexico’s largest mining company, operates the Cananea and Caridad porphyry copper mines in Sonora state, as well as other lead-zinc mines, metallurgical complexes and the nation’s largest rail system.

With the addition of Asarco’s four mines and its 54% controlling interest in Southern Peru Copper (PCU-N), Grupo Mexico would double its current copper production to nearly 2 billion lbs. annually. It also hopes to realize cost savings of US$100 million by integrating the two organizations.

Phelps Dodge had hoped to create the world’s largest copper company by merging with both Asarco and Cyprus Amax Minerals (CYM-N). However, it has only been successful in acquiring Cyprus Amax.