Vale in talks with Xstrata for a $100-billion merger

22 January 2008

Mumbai: Mining giants Companhia Vale do Rio Doce (Vale) of Brazil and Xstrata Plc of Switzerland are in talks, aiming to emerge as a new metals and mining behemoth, reports citing regulatory filings said.

A combination of Vale and Xstrata, which took over Canada's major nickel producers Inco and Falconbridge respectively, is expected to bring enough clout to face the challenges posed by other resource sector giants amidst a sell-off in global markets caused by fears of a US economic recession.

In a statement issued to the Brazilian stock market regulator, Vale confirmed that it was in talks with Xstrata about a potential takeover, but said the discussions had not produced any material results.

Vale issued the clarification after local newspaper reports said it was considering a potential takeover of Xstrata that could be worth $90-billion.
 
A successful deal would create the world's largest nickel producer and save nearly $500-million in annual costs.

Vale, which is looking for its largest acquisition yet, is also likely to make a deal with Xstrata to acquire aluminium assets once controlled by Canada's Alcan.

Vale, which is targeting to overtake BHP Billiton Ltd. and become the world's largest mining company, has its eye on other major acquisitions as well.