Vedanta’s new buy shows India Inc’s growing reach: WSJ

June 2nd, 2008 - 6:39 pm ICT by IANS  

New York, June 2 (IANS) Vedanta Resources’ purchase of the bankrupt US copper miner Asarco for $2.6 billion in cash has highlighted the growing global clout of companies from emerging markets like India, the Wall Street Journal (WSJ) has said. The deal announced Saturday by Sterlite Industries, a unit of Vedanta, is the latest in a string of foreign deals by Indian companies, the business daily said in a story headlined “Copper deal in US shows Indian firms’ growing reach”.

Companies in developing economies, flush with cash, are striking deals, in many cases snapping up established Western companies that have fallen on hard times, the paper said.

Countries such as India and Brazil are taking a larger piece of the mergers-and-acquisitions (M&A) pie. Emerging-market M&A activity in 2008 so far is up 17 percent over last year at this time, to $218 billion, while for the rest of the world it is down 43 percent, to $991 billion.

The WSJ cited a few examples of M&A activity in India. Reliance Communications is in talks with South Africa’s MTN Group for a possible merger, which will create one of the world’s biggest cellphone companies.

Tata Motors, part of the Tata group of companies, earlier this year, purchased the Land Rover and Jaguar brands from Ford for $2.3 billion. Sister company Tata Steel bought the Anglo-Dutch steel company Corus Group last year for about $12 billion.

The Asarco deal, the WSJ said, would mark a turning point for the world’s mining giants, creating a showdown between a powerful Latin American group - bidder Grupo Mexico which wants to challenge the sale and restore its ownership over the company - and an Asian rival for control over a US corporation.

Though Vedanta shares are listed on the London Stock Exchange, most of the company’s assets are in India. Chairman Anil Agarwal and his family control the company, which saw its share price rise about 70 percent in the past year. The company had sales of $8.2 billion during the last financial year.

Vedanta produces aluminum, copper, zinc and lead, with copper operations in India and smelting and refining operations in Zambia. The company is not known for acquisitions, but the few it has made, including the 2004 purchase of a majority stake in Zambia’s Konkola copper mines, have paid off quickly, the WSJ said.

Grupo Mexico contends the court-ordered auction for Asarco was flawed. The company insists it offered to pay Asarco creditors in full when initial bids were submitted in April.

Asarco’s attorneys say Grupo Mexico can’t know the value of what “paid in full” will be until all environmental litigation is settled, which could take years.

Litigation relates to disputes involving potential contamination at former Asarco sites in the western region of US. Earlier this year, New Mexico challenged the reopening of an Asarco smelter in El Paso, Texas, near the New Mexico border, which was closed in 1999.

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