Brazil Mining Company Vale SA Announces Plan for Single Class of Stock
February 20 2017 - 2:00PM
Dow Jones News
By Paul Kiernan
RIO DE JANEIRO -- Brazilian mining giant Vale SA announced a
plan Monday to create a single class of stock without a controlling
shareholder, likely reducing the potential for government
interference in what management characterized as a watershed for
the company.
The proposal seeks to unify Vale's two existing classes of stock
so that all of its shares carry voting rights, up from about 61%
now. Controlling shareholder Valepar, which currently holds 53.9%
of Vale's voting stock and is majority-owned by state-run entities,
would thereby lose its control of Vale.
"We're facing a historic moment for Vale, a landmark that could
be as important as privatization 20 years ago," Chief Executive
Murilo Ferreira said in a conference call with analysts. The
transaction, which would require minority shareholders to accept
0.9342 new shares for each nonvoting share they currently own,
would "turn Vale into a world-class company in terms of
governance," he said.
Though spurred by the expiration of Vale's shareholder agreement
later this year, the proposal comes at a time when corruption
scandals and Brazil's deepest recession on record have undermined
public trust in the government's ability to manage key sectors of
the economy. Vale is considered by many to be a quasi-state-owned
enterprise, as the biggest holders of its voting shares include
government-run pension funds and state development bank BNDES.
"It's probably overstated in terms of its day-to-day impact on
the management of Vale, but there is that sort of overhang, there
is that smell of it," said Paul Gait, a senior analyst at Bernstein
Investment Research and Management in London.
While the government can't call shots as directly at Vale as it
can at oil company Petróleo Brasileiro SA, politicians have managed
to pick bosses at the mining company. Mr. Ferreira himself was
installed by ex-President Dilma Rousseff shortly after she assumed
office in 2011. More recently, Brazilian newspapers have reported
that conservative Sen. Aécio Neves, whose party is key to President
Michel Temer's coalition in Congress, is vying to swap Mr. Ferreira
for a pick of his own despite private shareholders' desire to keep
the CEO in place.
Such rumblings are believed to be among the reasons for which
Vale's stock has long traded at a discount to other big mining
companies such as BHP Billiton Ltd. or Rio Tinto PLC. Analysts say
the proposal unveiled Monday should improve transparency and make
Vale easier to compare to its peers.
Vale's nonvoting shares recently traded 5.9% higher at 34.14
Brazilian reais ($11.68).
"This is normalizing the governance and shareholder structure at
one of the world's largest mining companies," Mr. Gait said.
"That's got to be a good thing."
Write to Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
February 20, 2017 13:45 ET (18:45 GMT)
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