Grupo Mexico SAB, the nation’s largest mining company, said it plans to merge its Asarco LLC and Southern Copper Corp. units into a single business to save costs after regaining control of Asarco late last year.
Investors would receive 1.237 shares of Americas Mining Corp., which owns Asarco, for each share of Southern Copper, Grupo Mexico said today in a statement. The transaction values Asarco at $5.94 billion, Grupo Mexico said. Americas Mining would list its shares in the U.S. and in Peru after the deal.
Combining the units would place all Grupo Mexico’s mining operations into one publicly traded company, allowing investors to value that separately from Grupo Mexico’s railroad and oil- drilling units. The merger would also cut transportation costs and capital investments, Grupo Mexico said.
Asarco’s “good fundamentals” should “generate more value for the group,” Rodrigo Heredia, an analyst with Ixe Grupo Financiero in Mexico City, said in a telephone interview.
As of yesterday, Grupo Mexico’s 80 percent stake in Phoenix-based metals producer Southern Copper was worth about $21.8 billion or 10 percent more than the Mexico City-based company’s own market value.
Combining units simplifies options for investors who may be interested exclusively in mining stocks, Heredia said. The next step for Grupo Mexico to increase shareholder value would be to list its transportation division, he said.
Grupo Mexico plans to sell shares in its railroad business in an initial public offering, Chief Financial Officer Daniel Muniz said in a May 21 interview. Grupo Mexico is controlled by billionaire German Larrea.
Southern gained 21 cents to $32.26 at 4 p.m. in New York Stock Exchange composite trading. The shares rose 11 percent in the four days before the announcement. Grupo Mexico added 1.21 pesos, or 3.7 percent, to 33.62 pesos in Mexico City trading, the biggest increase since June 10.
Americas Mining is fully owned by Grupo Mexico. Tucson, Arizona-based Asarco was in bankruptcy until Grupo Mexico regained control on Dec. 9.
After the transaction, Southern Copper’s minority shareholders would own 16.6 percent of Americas Mining, which would own 100 percent of Southern Copper, Grupo Mexico said.
Southern Copper plans to create a special committee of independent directors to evaluate the offer, Grupo Mexico said.
Morgan Stanley is the financial adviser to Grupo Mexico, and Skadden Arps Slate Meagher & Flom LLP is the company’s legal counsel.