No Signs Of Vale Interest After Anglo's Xstrata Rejection
June 23 2009 - 2:20PM
Dow Jones News
Anglo-American (AAUK) caused a stir in the market Monday by
rejecting a takeover bid by Xstrata (XTA.LN), but speculation
Brazilian mining heavyweight Vale (VALE) might step into the breach
was decidedly premature.
Market talk suggested cash-rich Vale might even bid for
Anglo-American.
"There's nothing concrete; it's just been some talk," said Banif
Investmento mining analyst Gilberto Cardoso.
He also saw nothing doing with a possible Vale bid for
Xstrata.
"I don't believe Vale has any interest in Xstrata anymore," he
said.
Early last year, Vale made a bid to acquire Xstrata but the two
sides failed to agree on terms.
Marcos Asuncao, Cardoso's counterpart at Banco Itau, also said
he believed Vale was unlikely to acquire either company.
"I think Vale still has a lot of idle capacity to use up before
it needs to buy other (iron ore) mining assets," he said.
Other market-watchers see possible dangers for Vale in the
current situation.
An analyst report by Rio-based brokerage Ativa Corretora on
Tuesday said Anglo's rejection of Xstrata was "potentially
negative" for Vale.
The report argued the mining sector was clearly going through a
new wave of consolidation.
Ativa cited merger moves between BHP Billiton (BHP) and Rio
Tinto (RTP), the present Xstrata and Anglo affair, as well as deals
between smaller players.
"The greatest consolidation opportunities are vanishing, and if
the BHP-Rio Tinto deal is completed, and there's a possible new bid
by Xstrata for Anglo, then these will be too big for a takeover by
Vale," the report said.
The result could be Vale losing its relative strength compared
to its competitors, the report reasoned.
Given this scenario, and Vale's need to diversify its portfolio
and reduce its dependence on iron ore, Ativa said it might be good
for Vale to restart talks with Xstrata or even between Vale and
Anglo.
However, Ativa also noted a possible downside to Vale renewing
its interest in other major mining companies.
"We must remember that, in the past, the market has punished
Vale shares when it has made any acquisition moves," Ativa
warned.
In mid-afternoon trading Tuesday, Vale's shares were up a tepid
0.03% at 34.58 Brazilian reals ($17.20). The benchmark Ibovespa
stocks index was also up 0.03%.
-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086;
john.kolodziejski@dowjones.com