Vale in hot seat for Anglo's $1.5bn fertiliser business

Click to follow
The Independent Online

Vale, the Brazilian mining giant, is believed to be eyeing up Copebras, the $1.5bn-valued fertiliser business owned by FTSE-100 giant Anglo American.

Cynthia Carroll, Anglo's chief executive, announced two weeks ago that she was willing to sell a number of businesses, including the Brazil-based Copebras, as part of a radical shake-up of the business.

A senior mining figure said: "I would be surprised if anyone other than Vale ended up buying this. It is under [political] pressure to spend money and invest in Brazil." The Brazilian government recently criticised the company for making redundancies and cutting investment this year, to which Vale responded by pledging to spend $12.9bn (£7.8bn) in 2010.

A second source, however, said that the fertiliser-makers Agrium, Terra, and the Mosaic Company are also thought to be considering bids.

Mining bankers have placed a value of $1bn-$1.5bn on the business, in which Anglo has a 73 per cent share.

Anglo also announced that it would sell steel products business Scaw Metals, the Brazilian ferroniobium producer Catalão, and its portfolio of zinc assets. The board does not consider these to be core businesses.

Together with Tarmac – the UK building materials business that Anglo wants to sell, but will not formally auction in the current construction downturn – the businesses represent 11 per cent of the group before interest, taxes, depreciation and amortisation.

Goldman Sachs and UBS, the investment banks that organised Anglo's successful defence against rival Xstrata's merger proposal, are likely to run the sales. It is believed that UBS is well positioned to run the Copebras process because of the investment bank's relative strength in Brazil.

Anglo announced its plans a week after Xstrata pulled its proposal for a "merger of equals", which would have seen Anglo shareholders not receive a premium for what many consider superior assets. However, Xstrata's move put pressure on Ms Carroll and Anglo's chairman, Sir John Parker, to improve the company's performance, having suspended dividend payments to shareholder earlier this year. They responded by announcing the sales and the removal of a layer of management estimated at saving $120m a year.

The management cull resulted in the loss of several big names at Anglo: Russell King, Philip Baum, and Ian Cockerill – the heads of strategy, ferrous metals and coal, respectively.

Ms Carroll said: "The portfolio changes we have announced are the logical next step in focusing the group on our core mining activities, enabling us to strengthen our balance sheet further. The delayering creates the opportunity for a new generation of executive management to come through."

Anglo shares closed at 2215p on Friday, down 3.7 per cent on start of trading. Xstrata finished at 882.5p, down 6.81 per cent.

Comments