November 25, 2008 / 6:28 PM / 9 years ago

UPDATE 1-Grupo Mexico plan for Asarco changes on copper fall

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MEXICO CITY, Nov 25 (Reuters) - Falling copper prices and rocky market conditions have changed the value of Grupo Mexico’s (GMEXICOB.MX) bankrupt U.S. unit Asarco, making the Mexican company’s offer to completely pay off Asarco’s creditors not viable, a Grupo Mexico lawyer told Reuters on Tuesday.

Grupo Mexico was kicked off Asarco’s board due to the bankruptcy proceedings and is fighting to reclaim control of the company in a U.S. court, but faces a rival bid from India’s Sterlite Industries STRL.BOSLT.N, a unit of Vedanta Resources Plc (VED.L).

Asarco, which operates three copper mines in Arizona, filed for bankruptcy protection when faced with millions of dollars in asbestos lawsuits.

Sterlite originally offered $2.6 billion to buy Asarco but withdrew from the deal in October because of falling metals prices. Vedanta said this month it was still eyeing Asarco but an agreement could only be reached at a substantially reduced price.

Grupo Mexico made a counter offer for Asarco, which totaled some $2.7 billion, and promised to pay off all creditors.

“When we first made the offer (to pay creditors 100 percent), it was rejected. Now the company has a different price, so obviously this offer is off the table, the world changed,” Jorge Lazalde, the lawyer in the Asarco case, said in an interview.

As copper prices plummet on worries of a global economic slowdown, Asarco was now operating at a loss, Lazalde said.

    Prices have slumped almost 60 percent from a record high in July as demand drops and stocks have more than doubled in London Metal Exchange warehouses.

    “With the October net loss of $10.7 million, Asarco’s appeal to a potential acquirer has changed,” HSBC said in a recent research note.

    Lazalde said Grupo Mexico was waiting to see if Asarco reached a revised deal with Sterlite to present a new offer.

    According to court documents, bankruptcy Judge Richard Schmidt in Corpus Christi, Texas allowed mediation between Sterlite, Grupo Mexico and Asarco to continue through Nov. 18, but said further mediation would have to be court approved. (Reporting by Mica Rosenberg in Mexico City and Emily Chasan in New York; Editing by Marguerita Choy)

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