Brazilian mining giant Vale S.A. (VALE) said Wednesday that it has agreed to sell minority stakes in its cargo logistics unit VLI S.A. to Japan's Mitsui & Co. Ltd. (MITSY) and a Brazilian government fund for a total of 2.71 billion Brazilian reais, or $1.24 billion.
The company also said it is in exclusive talks to sell an additional stake in VLI to a consortium led by a subsidiary of Canadian property manager Brookfield Asset Management, Inc. (BAM, BAM_A.TO). The stake sales in VLI are part of Vale's strategy to reduce its exposure to non-core assets and significantly reduce future capital expenditures on these assets.
Vale said it has signed two separate deals to sell a 20 percent stake in its integrated general cargo logistics company VLI to Mitsui & Co. for R$1.509 billion, and sell another 15.9 percent stake for R$1.2 billion to the Investment Fund of the Fundo de Garantia do Tempo de Serviço or FI-FGTS. The assets of FI-FGTS are managed by the Brazilian bank Caixa Econômica Federal.
Vale, the world's largest iron ore producer, added that it is in exclusive talks with a consortium led by Brookfield Brasil Ltda., a subsidiary of Brookfield Asset Management, for the sale of another 26 percent stake in VLI.
VLI is a rail-based logistics operator based on a warehouse/railway/port axis that transports general cargo for over 100 clients through an integrated logistics system comprising proprietary as well as third-party assets.
VLI has structured its operations in five corridors that are strategically positioned to serve the main agricultural and industrial regions of Brazil, with a special focus on the Center-Southeast, Center-East and Center-North corridors.
VLI owns rail concessions and subconcessions of about 10,700 kilometers, with a rolling stock of 13,000 rail cars and 600 locomotives. The company also has access to Vale's rail concessions.
Vale said it will allocate R$2 billion of the total cash that it will receive from the two firm deals as a cash contribution to VLI, which will issue new shares that will be subscribed and paid by Mitsui and FI-FGTS.
The cash contribution to VLI will be used to finance part of VLI's investment plan. The remaining amount of the transaction of R$709 million will be paid to Vale by Mitsui in exchange for VLI shares held by Vale.
Following conclusion of the two firm deals, Vale will retain shareholder control of VLI with a stake of 64.1 percent. Vale, Mitsui and FI-FGTS will sign a shareholders agreement, regulating their rights and obligations as VLI shareholders. However, in the event of a transaction with Brookfield, Vale's stake in VLI may be reduced to less than 40 percent.
In early August, Vale reported an 84 percent decline in profit for the second quarter, amid foreign exchange losses as well as declining minerals and metals prices. The company's net earnings for the quarter was $424 million or $0.08 per share, down from $2.640 billion or $0.52 per share in the prior-year period. Net operating revenue declined to $11.03 billion from $12.47 billion in the year-ago quarter.
VALE closed Wednesday's regular trading session at $16.71, up $0.55 or 3.40 percent on a volume of 19.80 million shares.
by RTT Staff Writer
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