Asarco to Accept Grupo Mexico’s Sweetened Bid

Asarco Inc. said Friday that its board will accept a newly sweetened $1.8-billion bid from Grupo Mexico, all but ending Phelps Dodge Corp.’s seven-week effort to buy the third-largest U.S. copper producer.

Asarco said Mexico’s largest copper producer and owner of a 10% stake in the company raised its cash offer by 25 cents a share to $29.75, and it will assume $1.02 billion of Asarco debt. Phelps’ last offer was for $29.29 in cash and stock.

The Grupo Mexico deal gives Asarco shareholders a 61% premium over Asarco’s price before the takeover battle started Aug. 20.

Phelps and Grupo Mexico officials declined to comment. Asarco spokesman Jerry Cooper declined to comment beyond a company statement.

The purchase of New York-based Asarco would make Grupo Mexico the world’s third-largest copper company, with production of about 800,000 metric tons annually. Asarco would also give the Mexico City-based company, which also owns Mexico’s longest railroad, a 54% interest in Southern Peru Copper Corp., a low-cost copper producer and one of the world’s top 10 producers.

Asarco’s acceptance of Grupo Mexico’s offer represents a change in course, as the company on Oct. 6 had accepted Phelps’ bid. Asarco said Friday that it notified Phelps that it will terminate its merger agreement Oct. 23. The company will pay Phelps Dodge a $30-million breakup fee when it terminates the merger, Cooper said.

Asarco had agreed in July to combine with Cyprus Amax Minerals Co. in an all-stock merger. The companies planned to cut costs to better cope with copper prices still recovering from a 12-year low in May.

Phoenix-based Phelps made an unsolicited bid for both Cyprus and Asarco on Aug. 20, threatening the companies’ planned merger, in an effort to become the world’s largest copper producer. That was scuttled when Grupo Mexico entered the fray Sept. 24 with its offer for Asarco. On Sept. 30, Phelps agreed to buy Englewood, Colo.-based Cyprus, which had been considering alternatives to its merger with Asarco.

On the New York Stock Exchange, Asarco shares rose 6 cents to close at $29.39, and Phelps rose 63 cents to close at $57.88.