VALE IS AFTER BIGGER FISH RIGHT NOW AND WANTS XSTRATA !!

Vale and Glencore in talks over Xstrata bid

Vale, the Brazilian miner, and Glencore, Xstrata’s largest shareholder, are understood to be discussing terms for a possible £45 billion takeover of the British-listed miner.

Senior executives from Vale are thought to have met Ivan Glasenberg, the head of Glencore, in London this week. The parties are said to be haggling over the price of the deal, with market rumour yesterday tipping a Vale bid at £48 for each Xstrata share.

Analysts said that the final price was more likely to settle at about £45 or £46 a share, which would value Xstrata at between £43 billion and £45 billion.

Xstrata’s share price closed up 70p at £38.50 yesterday. A £46-a-share bid would represent a premium of nearly 20 per cent.

However, the deal is complicated by what Glencore, the Swiss metals trader, wants in return for its 35 per cent holding in Xstrata.

Mr Glasenberg is thought to favour swapping his stake in Xstrata for a holding in an enlarged Vale, formerly CVRD.

He is also negotiating to retain important advisory and marketing rights that Glencore has with Xstrata.

As the largest metals trader in the world, Glencore is well placed to offer Xstrata advice on how to price deals with buyers.

Xstrata’s coal deals are said to be priced at a premium to its rivals as a result.

Glencore provides logistical support for Xstrata’s copper division, arranging the movement of metal around the world.

It also sells the company’s nickel directly into the world market.

If Glencore swaps its holding in Xstrata for shares in an enlarged Vale, it would own about 15 per cent of the Brazilian group.

Vale is pursuing Xstrata because it wants to diversify away from its core business, which is Brazilian iron ore.

A combined Vale-Xstrata would be the world’s largest producer of iron ore and would also have large coal, nickel and copper assets. None of the parties involved would comment yesterday.

An Xstrata shareholder said: “All sides want this and I think there is a good likelihood of it going ahead, possibly as early as next week.”

The deal could still be derailed by political concerns in Brazil. The Brazilian Government owns 53 per cent of Vale through pension funds and a development bank and there has been a debate in the country over whether it is right for the miner to spend its money on foreign acquisitions.

The Brazilian Government is also concerned about the Xstrata deal diluting its ownership below 50 per cent, but this may be resolved by the company issuing a “golden” blocking share.

This would give the Brazilian Government blocking rights over the appointment of senior executives and large acquisitions.

Xstrata was created from coal assets spun out of Glencore by Mick Davis, its chief executive.

The company listed in London in 2002 with a market capitalisation of £1 billion.

It has embarked on a series of acquisitions but was effectively put up for sale by Mr Davis in December.