M&A

13 November, 2009

Judge tells Grupo to offer contract to Asarco union

* Judge orders Grupo to make proposal to union

* Grupo says still needs more time to negotiate

* Grupo says would assume Asarco's existing union contract

By Emily Chasan

NEW YORK, Nov 13 (Reuters) - The U.S. federal judge, deciding whether Grupo Mexico SAB de CV (GMEXICOB.MX) should be able to regain control of bankrupt U.S. copper miner Asarco LLC, has ordered Grupo Mexico to present a contract to Asarco's union.

Judge Andrew Hanen, who sits in the U.S. District Court in Brownsville, Texas, said in a court order on Thursday that Grupo must make a "comprehensive proposal" to Asarco's United Steel Workers union by Nov. 24.

After a year long takeover battle, Hanen is deciding whether Grupo Mexico or rival Indian bidder Sterlite Industries (STRL.BO) should get control of Asarco, which runs three copper mines in Arizona.

U.S. Bankruptcy Judge Richard Schmidt had twice recommended that the District Court approve Grupo Mexico's $2.4799 billion offer for the company over the offer from Sterlite.

Sterlite's bid, however, has been long-supported by Asarco's union, as the two parties have an agreement for a new contract. Grupo Mexico, however, has been stalled in talks with the union for months.

"The previous discussions of the parties seemed to be locked in inertia for reasons neither side could adequately explain and this court cannot fathom," Judge Hanen wrote in the order, saying attorneys for the union and Grupo have previously expressed a desire to reach an agreement and bargain in good faith and he wanted an update on their progress.

Grupo, which acquired Asarco in a leveraged buyout in 1999 but lacks control of the company due to the bankruptcy, said in a court filing on Thursday that it had been working on an update to file with the court at the same time the judge issued the order.

Grupo said in the court filing that the reorganized Asarco would assume the union's existing contract once its plan is confirmed by the court.

That contract extends through next June and Grupo has offered to extend that contract for another year as well. Grupo also said in the court papers that it has offered to let the union have a representative sit on Asarco's board.

However, it said the union and Grupo were still far apart on issues necessary to come up with a new contract, such as the time frame of that contract, and would need more time to negotiate.

Asarco filed for bankruptcy protection in 2005 amid a worker strike and more than $1 billion of asbestos and environmental claims. If Grupo regains control of Asarco it has said the addition of the company could boost its copper production by as much as 30 percent.

In Grupo's court filing, it urged the court to issue its opinion on Asarco before the end of November, as it has a financing agreement to support its bid that expires on Dec. 23, and it needs 30 days to close the deal.

The case is In re: Asarco LLC, U.S. District Court, Southern District of Texas, No. 09-00177.

(Reporting by Emily Chasan)

Source: http://www.reuters.com