Vale Rejects Xstrata Takeover Chatter

Brazilian mining concern Vale issued a statement Tuesday denying rumors that it is in talks or has any plans to acquire Xstrata, the Swiss-headquartered global miner it attempted to buy earlier this year for an estimated $90bn. Loans markets bankers note that the value would be significantly less than that this time – some estimate it would cost under $20bn – and that Vale’s $14bn cash warchest would cover a lot of the financing. The balance should be available short term in these markets, though some lenders might question the credit, given a recent slump in commodities. Vale attempted in March what would have been LatAm’s biggest takeover ever recorded and succeeded in clinching some $50bn in loan commitments for the deal, but was not able to convince Glencore, Xstrata’s lead shareholder, to sell. The two companies apparently could not agree on marketing rights for certain critical minerals with Glencore heard demanding the right to sell iron ore to third parties and Vale insisting it would not give up its existing bilateral relationships with its clients. The collapse of the talks in April dealt a major blow to investment bankers and syndicated lenders in the region who were heard to be eligible for a collective $100m in fees related to advisory and balance sheet deployment if the deal had gone through. This time round, the stakes are much lower, but Glencore may again opt to block a deal, particularly at such a compressed price.