UPDATE 3-Brazil's Vale says Xstrata takeover talks fail

(Rewrites throughout with CEO and analyst comments)

By Reese Ewing and Eric Onstad

SAO PAULO/LONDON, March 25 (Reuters) - Brazil's Vale (VALE5.SA) RIO.N, the world's largest iron ore miner, said on Tuesday that talks to buy Swiss rival Xstrata had failed and that Vale would look at other potential takeover targets.

If Vale had succeeded, the deal would have been one of the largest corporate takeovers in history. Some analysts had valued Xstrata at up to $90 billion.

Vale's (VALE5.SA) RIO.N 48-year-old chief executive Roger Agnelli, a former banker said to have a nose for great deals, said talks fell through because both sides had failed to agree on marketing rights for the potential future company.

But a source with direct knowledge of the deal said price was the ultimate culprit that brought down negotiations.

Xstrata confirmed the talks had collapsed.

"While Vale and Xstrata continue to believe that a combination of the two companies could realize significant value for both sets of shareholders, we have not been able to reach an agreement," Xstrata's (XTA.L) chief executive Mick Davis said without giving a reason for the breakdown in talks.

Agnelli denied that talks were scuppered by problems in financing the deal. Its takeover attempt has coincided with tumultuous volatility in global equity and credit markets.

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

"We didn't need to buy and they didn't need to sell," Agnelli said late on Tuesday and a news event in Sao Paulo.

Xstrata's main shareholder, trading house Glencore International, holds marketing rights to a large chunk of Xstrata's output in nickel, copper and other metals.

And it was looking to expand its rights in the merged company, something that Agnelli had previously said would be difficult to overcome given Vale's relationship with its clients.

PRICE

The recent softening in Vale's share price since its peak in October, despite its securing a hefty 65 to 71 percent price hike from clients for iron ore in the past weeks, was the main reason that the talks failed, a source in London close to the deal said.

Progress had been made in bringing Vale and Glencore closer on marketing rights but there was no point continuing talks if Vale was not able to pay a high enough price, he said.