Mexican firm foils Phelps' Asarco bid
By Staff -- Purchasing, 1/13/2000
Analysts are only mildly disappointed that Phelps Dodge couldn't absorb Asarco after buying Cyprus Amax Minerals. Still, they see supply-tightening benefits from the Phelps-Cyprus merger and from the marriage of Asarco and Grupo Mexico. "The three-way merger would have been the best of all market, but the oversupply situation will be lessened by two companies instead of four," says analyst Ali Agha at Donaldson, Lufkin, & Jenrette.Phelps Dodge announced plans in August to launch hostile bids for Asarco and Cyprus Amax Minerals, which themselves had announced a merger in July. Phelps Dodge succeeded in breaking up that agreement and signed a friendly $1.8 billion pact with Cyprus. But, its efforts to buy Asarco were complicated by an unexpected late-September bid by Grupo Mexico, which already owned a 10% stake in Asarco.
Without Asarco in its portfolio, Phelps Dodge now ranks as the world's No. 2 copper producer behind Chilean-owned Codelco. With the acquisition of Asarco, Grupo Mexico has captured the third spot. Germany's Norddeutsche Affinerie has agreed to take over rival Huettenwerke Kayser, creating the world's fourth-largest cathode producer with annual capacity of 543,000 tonnes per year. Lately, Codelco has been studying the possibility of buying foreign companies to maintain its market share, admits Ivan Valenzuela, VP for explorations and alliances. Just recently, Codelco, and Mexico's Penoles, the world's largest silver producer, signed a pact to explore jointly and to exploit copper prospects in Mexico's northern Sonora state.
The world surplus of refined copper rose to 218,000 tonnes over the first eight months of the year, compared with 131,000 tonnes in the same 1998 period, the International Copper Study Group says. Growth in refined copper consumption has been slow and concentrated mostly in Europe and North America. On a global basis, production levels have grown. While North American production has been falling sharply, Asian, South American, and Australian output has been going up.
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