Grupo Mexico unit inks $24.5 mln settlement for Southern Copper suit

The seal of the Court of Chancery for the State of Delaware is seen on a wall in the Sussex County Court of Chancery in Georgetown, Delaware, U.S., June 9, 2021. REUTERS/Andrew Kelly
  • Settlement would resolve claims Southern Copper's board helped Grupo Mexico unit exploit its control of copper producer
  • Suit challenged transactions between the companies that weren't reviewed by independent directors

(Reuters) - Grupo Mexico SAB de CV subsidiary Americas Mining Corp has agreed to a $24.5 million cash settlement to resolve a derivative suit accusing it and Southern Copper Corp’s board of completing “unfair” transactions at the copper producer’s expense.

If approved, the settlement would release Americas Mining and the board members from Southern Copper investor Carla Lacey’s claims that they allowed Grupo Mexico to exploit the company through construction contracts, rail line use agreements, mineral sales and other deals.

The bid to resolve the suit was filed on Tuesday in the Delaware Chancery Court. In connection with the proposed settlement, Lacey plans to ask the court to award it up to $7.5 million in attorneys fees.

The proposed settlement comes two years after Lacey settled a proposed class action challenging transactions related to Southern Copper’s sale of two electrical power plants to Grupo Mexico in January 2019.

Lacey’s attorneys from Friedman Oster & Tejtel did not immediately respond to requests for comment on Wednesday. Neither did attorneys for the board members and Southern Copper. Attorneys for Grupo Mexico and Americas Mining declined to comment.

In an April 2019 lawsuit, Lacey claimed that Southern Copper’s board and Grupo Mexico “worked in concert for decades to systematically violate” Southern Copper’s requirement that transactions between the two companies be reviewed by independent board directors.

The investor said that the board’s failure to do that resulted in the Phoenix-based company entering into “grossly unfair” deals with Grupo Mexico and its subsidiaries.

Grupo Mexico owned 88.9% of Southern Copper through its subsidiary Americas Mining at the time the initial complaint was filed.

An amended complaint was later filed under seal.

The board members and subsidiary Americas Mining Corp have denied the allegations. Claims against Grupo Mexico were dismissed in October 2020.

The case is Lacey v. Mota-Velasco, Delaware Court of Chancery, No. 2019-0312.

For Lacey: Jeremy Friedman, Spencer Oster and David Tejtel of Friedman Oster & Tejtel

For the Southern Copper board: Bradley Benoit and Bryan Dumesnil of Bracewell; Steven Selsberg of Selsberg Law; and Sylvia Mayer of S. Mayer Law

For Southern Copper: Samuel Hirzel of Heyman Enerio Gattuso & Hirzel

For Grupo Mexico and Americas Mining: Robert Giuffra Jr and David Rein of Sullivan & Cromwell

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Sierra Jackson reports on legal matters in major mergers and acquisitions, including deal work, litigation and regulatory changes.