Brazils Vale says Xstrata talks fail

Brazils Vale says Xstrata talks fail

Vale , the world’s largest iron ore miner, said on Tuesday that talks aimed at buying Swiss rival Xstrata had failed and that Vale would look at other potential takeover targets.

“Given that an agreement was not reached, discussions between the parties have been discontinued,” Vale said in a statement to the local market regulator. Vale said it reserved the right to make a new offer for Xstrata if circumstances changed.

No one at Xstrata was available to comment.

Earlier on Tuesday, Vale’s chief executive said acquiring Xstrata was not a priority.

“It’s a difficult operation. It’s not simple, and there are issues involving marketing rights that we’re discussing. But it’s not something that’s a priority for Vale,” CEO Roger Agnelli told reporters in Sao Paulo.

The negotiations, which had gone on for months, were bogged down over price and marketing rights.

Xstrata’s key shareholder is commodities trading house Glencore.

Asked earlier on Tuesday if talks had progressed, Agnelli said, “We’re at the stage that we’ve always been in. We’re flirting, and it takes a while before that becomes marriage.”

“We’re ready to make the acquisition, but we’re not going to sacrifice what is fundamental for us, which is generating value for our shareholders.”

In February, some analysts said a deal between the two companies could be worth as much as $90 billion (44.9 billion pounds), making it one of the biggest acquisitions in corporate history.

In preparation for a potential Xstrata takeover, Vale had secured an estimated $50 billion financing package from around eight banks including Santander, HSBC, BNP Paribas, Lehman Brothers, Credit Suisse, Citigroup, Calyon and the Royal Bank of Scotland.

A takeover of Xstrata would have allowed Vale to increase its presence in base metals such as nickel and copper, further reducing its dependence on iron ore.

Agnelli stressed earlier on Tuesday that Vale would continue to diversify regardless of the outcome of the talks with Xstrata.

“Xstrata is not the only opportunity,” he said. “There are others.”

He also said he did not think the recent boom in commodity prices had come to an end, and added that strong demand from Asia would likely continue to push prices higher.

“People ask me if the cycle has ended,” he said. “I don’t think so. I think it’s going to last for a while.”

Vale shares rose 2.76 percent on Tuesday to close at 47.58 reais after Agnelli spoke but before the official statement that the talks had failed. Xstrata shares closed up 6.69 percent on the London exchange.

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