October 07, 2008

Vale Xstrata tie up – Brazilian government undecided

Bloomberg, citing Brazilian President Mr Luiz Inacio Lula da Silva, reported that Brazilian government has taken no position yet on Vale’s offer to buy Xstrata Plc.

O Estado de S Paulo reported on its Web site that the government still hasn't discussed the issue. Mr Lula da Silva said The government has not discussed this issue yet.”

According to Estado, the Brazilian president did not rule out the possibility of using the government's golden share' veto power in Vale to block the transaction.

According to an earlier report in Valor Economico, Brazil's government is against Vale taking over Xstrata as it considers the offer to be expensive and harmful to the country's interests.

However, as per some analysts, this could be a move to lower the transaction price. Mr Michael Rawlinson head of mining, resources and energy at Liberum Capital Ltd. in London said that “We feel the story is somewhat of a scare story in part released by Vale's advisers to negotiate a lower price for Xstrata. We feel it inconceivable that Vale enter into detailed discussions in a major acquisition flagged since mid December without having its own board behind it.”