Xstrata’s shares crashed 12% today on news that long-running £45bn takeover talks with suitor Vale (NYSE: RIO) of Brazil have collapsed.
Market watchers have been waiting for the outcome of Brazilian mining giant Vale’s attempt to acquire Anglo-Swiss rival Xstrata (UK: XTA).
The possible $90 billion deal was originally floated in January, but no firm plans were set one way or the other. Vale CEO Roger Agnelli said in a recent Reuters report that “We’re at the stage that we’ve always been in. We’re flirting, and it takes a while before that becomes marriage.” Today, according to Reuters – the talks collapsed over a dispute over future marketing rights.
While a deal would have made Vale the world’s leading nickel producer and boosted its presence in copper, some analysts feared that it might overpay for Xstrata and take on too much debt in its zeal to reduce its dependence on iron ore, the main ingredient in steel.
The announcement puts an end to the uncertainties regarding the timing of the deal, allowing the market to focus on the rise in iron ore and pellet prices, which has not yet been fully reflected in Vale’s stock price,” said Rogerio Zarpao, an analyst at Brazilian bank Unibanco.
Already the world’s largest producer and exporter of iron ore, Vale has been aggressively seeking to expand into other metals in recent years. After the Xstrata talks collapsed, Vale Chief Executive Roger Agnelli said the company would keep looking for other acquisition targets around the globe.
Rio’s shares are currently trading up $1.32 for the session @ $34.33 real time quote.
