PHOENIX (CN) – A police and firefighters pension plan claims that Grupo Mexico, a copper conglomerate, is scooping up millions of shares of a copper company in exchange for shares of a company that does not exist yet. The shareholders class action claims that Grupo Mexico, which owns 80 percent of Southern Copper Corp. through its subsidiary Americas Mining Corp., is buying all of the 170 million shares of Southern Copper that it does not already own in exchange for shares of Americas Mining, which is not listed on any stock exchange.
The City of North Miami Beach Police Officers’ and Firefighters’ Retirement Plan claims the proposal is “grossly inadequate,” as shareholders would end up owning 16.6 percent of Americas Mining common stock instead of the 20 percent of Southern Copper stock that they own now.
The pension plan says Grupo Mexico announced on July 23 that Americas Mining had “submitted a nonbinding indication of interest for an all-stock business combination of SCCO and AMC.”
Grupo Mexico, the largest mining corporation in Mexico, “has a long history of self-dealing transactions negotiated and consummated through unfair procedures” and “intends to repeat this history in forcing the public minority shareholders to capitulate to the proposed transaction,” the class claims.
Americas Mining’s assets are the 80 percent ownership of Southern Copper and 100 percent ownership of ASARCO, another giant copper mining company, the class claims.
To support the proposed stock transaction, Grupo Mexico assigned $5.9 billion to ASARCO, which “emerged from bankruptcy just over seven months ago.”
That amount comes to 34.3 times earnings, the shareholders say, but the deal values Southern Copper’s equity at just 16.3 times earnings, though Southern Copper “is one of the world’s largest copper producers poised for continued growth.” The complaint claims that since ASARCO’s “asset quality” is poorer than Southern Copper’s, the exchange ratio “grossly overvalues” ASARCO and the Americas Mining stock to be received by Southern Copper shareholders.
Fourteen people are named as defendants, along with Grupo Mexico, Americas Mining Corp., and Southern Copper Corp.
The shareholders want the transaction enjoined, an accounting and damages. They are represented by Richard Himelrick and J. James Christian with Tiffany & Bosco.