Vale, Xstrata Heard Inching Closer to Deal

The talks between Vale and Xstrata for a potentially $85bn acquisition of the Swiss mining concern are said to be on an upswing, and the two sides are seemingly closer to a deal than they ever have been, according to executives close to the matter. Vale and Glencore, the commodities house that owns 35% of Xstrata, are negotiating hard on two main fronts: the price Vale would pay and the details of a marketing agreement that would permit Glencore to sell some of its commodities. In other words, any deal would definitely include a marketing agreement of some sort. One Europe-based investor says rumors were floating around the market Wednesday morning that an agreement had been reached, but executives close the process said talks are still in progress. JPMorgan and Deutsche Bank are advising Xstrata. Glencore is heard to have hired Citi and Morgan Stanley while Credit Suisse is understood to be among Vale’s advisers. Meanwhile, invites are out to participate in the $50bn loan backing the transaction. At least seven banks have committed to tickets of up to $7.5bn each. Santander, HSBC, Credit Suisse, RBS via ABN AMRO, Lehman, Citi, and BNP are all heard participating. A 5-year trade piece is heard paying around 120bp over Libor, while a 7-year pays 140bp.