Cia. Vale do Rio Doce seeks to raise about $15 billion in a share offering this week, the biggest sale ever by a Brazilian company, as global stock markets slide.
Vale, the world's biggest iron-ore producer, will price the 256.9 million common shares and 164.4 million preferred shares on July 16, and the stock will start trading in Brazil and abroad two days later. Vale said in June it wanted to raise the cash to fund expansions and acquisitions, fueling speculation the Rio de Janeiro-based company was preparing a new acquisition drive after it abandoned a $90 billion bid for Xstrata Plc earlier this year.
Vale's roadshow to solicit investments attracted a ``full house'' in New York and Toronto, even as economic weakness in the U.S. and Europe caused global stock markets to decline, Chief Executive Officer Roger Agnelli said July 11. Brazil's benchmark Bovespa index has plunged 18 percent from its record close on May 20, while the Dow Jones Industrial Average (INDU) in New York fell 13 percent and the FTSE 100 Index (UKX) lost 15 percent.
``This is not the best time to be raising equity,'' Will Landers, BlackRock Inc.'s Latin America portfolio manager, said July 9 by telephone from Plainsboro, New Jersey. ``On the other hand, it could be interesting to buy at a cheaper price.''
Vale preferred shares fell 14 centavos, or 0.3 percent, to 42.95 reais on July 11 in Sao Paulo trading. The shares have declined 13 percent this year.
BlackRock in June bought a 10.5 percent stake in Bradespar, part of the group that controls Vale. The group, Valepar SA, said last month it would maintain its 53.3 percent stake in Vale. Valepar shareholders include Bradespar SA (BRAP4), the investment arm of Bradesco group; Previ, the employee pension fund of state-controlled Banco do Brasil SA (BBAS3), pension funds Petros, Fundacao Cesp and Funcef; BNDESPar, part of Brazil's state-owned development bank; and Japan's Mitsui & Co.
Credit Suisse Securities LLC is managing the share sale, in which international investors may opt to receive American depositary receipts. Vale said July 3 it will apply to list on the Paris-based Euronext exchange. Existing Vale shareholders who are residents in Brazil had the priority in the offering.
The share sale represents about 10 percent of Vale's market value of 232.9 billion reais ($145.5 billion) on July 11.
``The bear market shouldn't affect the issue,'' Bernardo Lobao, a steel and mining stock analyst at Rio-based ARX Capital Management, said July 9. ``The company's shares have great liquidity. Including ADRs, trading of Vale shares totals nearly $2 billion a day, so the total offer is equivalent to about six days' trading.''
Brazil's O Estado de S. Paulo newspaper, citing people connected to Vale, reported June 10 that the company was considering an offer for Anglo American Plc (AAL), Alcoa Inc. (AA) or Freeport-McMoRan Copper & Gold Inc. Vale said July 1 that it studying a possible bid for copper smelter Caraiba Metais SA and phosphate fertilizer maker Cia. Brasileira de Fertilizantes, subsidiaries of Brazil's Paranapanema SA (PMAM3) group.
An acquisition would be in addition to the $59 billion the company is already spending over five years as it seeks to become the world's biggest mining company, overtaking BHP Billiton Ltd. (BHP)
Vale, which bought Canada's Inco Ltd. last year to become the world's second-biggest nickel producer, walked away from talks in March to buy Zug, Switzerland-based Xstrata. Agnelli said at that time the negotiations failed because of the demands of Xstrata's biggest shareholder, Glencore International AG.
``Vale is likely to make a significant acquisition over the next 12 months,'' said Paul Cliff, a London-based analyst with a unit of Japan's Nomura Holdings Inc., which has a ``buy'' rating on Vale shares. ``Its two major rivals -- BHP Billiton and Rio Tinto -- are tied up in merger talks. This gives Vale the opportunity to do something major.''
Vale could likely raise more than $50 billion in an ``acquisition war chest'' to fund a purchase, he said.
Currency, Bonds, Bovespa,
Last week, the real rose 0.4 percent to 1.6010 per dollar, bringing its year-to-date gain against the U.S. currency to 11 percent. The yield on the government's zero-coupon bond due January 2010 fell 0.3 percentage point to 15.18 percent.
The benchmark Bovespa index gained 1.3 percent, its first weekly gain since the end of May, to 60,148.26.
The national statistics agency may say on July 15 that retail sales rose 10.6 percent in May from a year earlier, according to the median estimate of five economists surveyed by Bloomberg.
The following is list of events in Brazil this week:
Event Date Brasil Telecom Participacoes SA Earnings 7/15 FGV Inflation IGP-10 7/16 FIPE CPI - Weekly 7/18
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