September 07, 2008

Vale Xstrata tie up – Vale hurrying for financing

Times Online reported that Vale has taken a decisive step towards a bid for rival Xstrata by lining up a USD 50 billion financing package from a powerful group of global banks. The report said that Mr Fabio Barbosa CFO of Vale flew to London last week and met up to 12 banks.

As per report, HSBC is leading a consortium thought to include Santander, BNP Paribas, Lehman Brothers, Credit Suisse and Citigroup.

The report added that Mr Roger Agnelli CEO of Vale recently met Mr Luiz Inácio Lula” da Silva president of Brazil, to get the final go ahead as the government controls nearly 53% of Vale’s stock.

The report cited a source close to the Vale-Xstrata talks as saying that “There is a real sense of urgency in Vale, particularly to get the financing organized in case markets get worse. There is also an added incentive to try to organize financing before the deadline for BHP to bid for Rio Tinto on February 6th 2008, again just in case the banks are tied up.”

Vale, which is being advised by Lehman, has been working on due diligence for several weeks. Xstrata is advised by JP Morgan Cazenove.