Vale of the duds

12 February 2008 By John Foley Follow @johnsfoley

The Brazilian miner’s $76bn cashandshares comeon to its UK rival was easy to reject. Vale’s stock is a depreciating currency, and government meddling makes its value uncertain. For now, neither side should be rushing to do a deal.

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Xstrata, the UK miner, rebuffed an informal approach from Brazilian rival Vale that valued the company at around £40 a share, or £39bn ($76bn), according to people familiar with the situation. The offer was made partly in cash, and partly in Vale shares.
Vale, formerly known as CVRD, has two classes of shares preference and common. The Brazilian government holds 53% of the common shares, with which it can effectively control board nominations. The government also holds "golden shares" that allow it to veto certain changes to the company's structure.

Vale's shares have fallen 11% since November 7, the day before BHP Billiton, the world's largest miner, made an allshare offer for Rio Tinto of the UK. Over the same period, Xstrata's shares have risen 18%, based on Monday's closing price.

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Vale of the duds

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