WILMINGTON, Delaware (Reuters) - Mexican copper miner and railroad operator Grupo Mexico (GMEXICOB.MX) will pay a $2 billion judgment to Southern Copper Corp (SCCO.N) on Tuesday in cash, raised via a syndicated loan, foregoing an option to pay in stock, Grupo Mexico’s general counsel said on Monday.
The payment will end a seven-year legal battle with Southern Copper’s minority shareholders, whose share of the judgment will be about $400 million, barely more than the $315 million in shareholder legal fees that Grupo Mexico must pay -- among the largest ever awarded in a U.S. securities class action suit.
Grupo Mexico, which owns about 80 percent of Southern Copper, decided not to pay the judgment in the form of Southern Copper stock because the share price has surged since the time of the court ruling, making that option more expensive.
“We will pay tomorrow,” Grupo Mexico General Counsel Mauricio Ibanez told Reuters. “We decided cash is the best route.”
The Delaware Court of Chancery found in October 2011 that Grupo Mexico was responsible for coercing Southern Copper into overpaying for mining company Minera Mexico. Grupo Mexico controlled both Southern Copper and Minera Mexico at the time of the transaction.
The Delaware Supreme Court affirmed the judgment in late August after Grupo Mexico appealed.
The lawsuit was what is known as a derivative suit. The shareholders sued on behalf of Southern Copper and the judgment will not be paid directly to stockholders but to Southern Copper.
Grupo Mexico had argued for overturning the judgment for several reasons, including a refusal by chancery court judge Leo Strine to allow a witness from Goldman Sachs, which advised Southern Copper on the deal.
Ibanez noted that because of Grupo Mexico’s stake in Southern Copper, only about 20 percent of the judgment benefits minority shareholders, or $400 million.
Ibanez also said the attorneys representing the Southern Copper shareholder who brought the lawsuit would be paid their legal fees on Tuesday. The law firms are Prickett, Jones & Elliott of Wilmington, Delaware, and Kessler Topaz Meltzer & Check of Radnor, Pennsylvania.
The company had the option to pay the $2 billion judgment in cash or by returning some of the Southern Copper stock it received in the deal for Minera Mexico, according to the judge’s ruling.
Grupo Mexico decided to pay in cash because the stock-return alternative valued Southern Copper stock at $26.96 per share, Ibanez said. The stock was trading at that price when the judge issued his ruling on fees and payment details last December.
On Monday, Southern Copper’s stock traded around $35, an increase of more than 30 percent since the judgment, making a syndicated bank loan a cheaper option, Ibanez said. He declined to comment on which banks were involved.
“Basically it’s a syndicated bank loan but I can’t comment much on that,” he said.
Grupo Mexico’s stock fell 1.9 percent on Monday, closing at an adjusted 42.19 pesos on the Mexico City bourse, while Southern Copper closed up 0.4 percent at $35.42 on the New York Stock Exchange.
Writing by Gabriel Stargardter; Editing by Simon Gardner and Carol Bishopric