Brazil’s Temer Said to Seek New Vale CEO in Shareholder Talks

  • Coincides with talks to renew controlling shareholder pact
  • Ferreira exit wouldn’t be welcomed by investors: Votorantim

Brazil’s government has decided to push for a new chief executive for iron-ore giant Vale SA when the current boss’s contract expires next year, according to people with knowledge of the matter.

President Michel Temer ceded to months of lobbying from members of his own Democratic Movement Party to seek a replacement for Murilo Ferreira, who was appointed when Temer’s predecessor was in power, the people said, asking not to be identified because talks are private. His contract ends at the end of April.

Michel Temer

Photographer: Christopher Goodney/Bloomberg

While the world’s largest iron-ore miner is an independently run company, it’s controlled by a holding company whose owners include state pension funds and a development bank. The government will try to work with private-sector shareholders including Banco Bradesco SA and Mitsui & Co. to select a new CEO with a strong market background, the people said. The effort comes as the controlling group works on renewing a 20-year-old pact that will expire about the same time as the CEO’s contract.

Vale’s press department declined a request for comment from Ferreira. When asked if he would be willing to remain in the position, Ferreira said that was a matter for shareholders, Estado reported last month. The press office of Brazil’s presidency declined to comment.

Ferreira, who was appointed in 2011 as part of a management shakeup driven by then President Dilma Rousseff, has been in the cross hairs of members of the Democratic Movement Party since Temer took power. They have rallied behind criticism over Vale’s initial response to a tailings dam collapse at its joint venture with BHP Billiton Ltd., and diminishing investments at its traditional mining heartland of Minas Gerais state.

The Rio de Janeiro-based company has defended both its initial and ongoing response to the Samarco disaster and its strategy to focus investments on low-cost deposits in northern Brazil. After Ferreira reduced debt and costs to cope with lower prices, Vale’s shares have more than doubled in value this year, outperforming its main rivals.

His departure would be unwelcome news for investors, Votorantim analyst Paschoal Paione said. "Everybody supports Ferreira. The investors, the main shareholders, so it is very strange this will of the government to change the CEO."

Vale is controlled by Valepar SA, a holding company owned by state-run pension funds Funcef, Previ, Petros and Funcesp, and development bank BNDES, along with two non-state-owned shareholders Bradespar SA, the holding company of Bradesco, and Mitsui. The company, one of Brazil’s largest exporters, has operated for years as a quasi-state-run miner because of its blend of public and private shareholders.

Bradespar declined to comment, while Mitsui didn’t immediately respond to requests for comment. In June, Vale said its controlling shareholders hadn’t communicated any intention to replace Ferreira.

“In my opinion, Bradespar and Mitsui do not have the intention to change the CEO,” Paione said. “However, maybe this issue will be put on the table with the shareholders’ agreement renewal.”

‘Conflicting Signal’

Temer took over during Rousseff’s impeachment process with the stated intention of pushing a market-friendly agenda in the hopes of rescuing Brazil from economic crisis.

Part of his pro-market strategy involved replacing executives at large state-run enterprises such as Petrobras that had lost much of their value due to corruption and mismanagement, said Christopher Garman, managing director at Eurasia Group in Washington. But in the case of Vale, Temer’s choice to intervene contradicts the philosophy he has championed so far, he said.

"It does send a conflicting signal when you have the government willing to use its share in one of Brazil’s largest companies to influence who will be CEO," Garman said by telephone.

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