By Jeb Blount and Caroline Stauffer
RIO DE JANEIRO/SAO PAULO, Sept 18 Brazilian
mining company Vale SA said on Wednesday it plans to sell
control of its VLI SA general rail- and port-cargo unit to
Canadian, Japanese and Brazilian investors in a transaction
expected to be worth about 4 billion reais ($1.79 billion).
Under the plan, Tokyo-based trading company Mitsui Co
, will pay 1.51 billion reais for 20 percent of VLI and
Brazil's FGTS worker compensation and retirement fund will pay
1.2 billion reais for 15.9 percent. Toronto-based Brookfield
Asset Management Inc is in exclusive talks to buy about 26
percent of VLI, Vale said in a statement.
The Mitsui and FGTS sales will cut Vale's share in VLI to
64.1 percent, Vale said. The Brookfield stake would cut Vale's
share to 38.1 percent, based on Vale figures. Chief Executive
Officer Murilo Ferreira told reporters in Brasilia - without
giving a price - that the Brookfield stake would be valued
similarly to the Mitsui and FGTS shares.
In the face of a weak world economy, falling commodities
prices and slowing growth in China, Vale's largest market,
Ferreira is moving to slash costs, sell assets and focus
spending on the company's core iron ore business.
"Vale will have a minority stake when the three shareholders
have their parts," Ferreira said after meeting with President
Dilma Rousseff in Brazil's capital. "In the future we could see
a public offering so the Brazilian and international public can
also be shareholders."
The world's second-largest mining company, Vale is the
world's largest producer of iron ore, the main ingredient in
steel, and the No. 2 producer of nickel, used to make steel
rust-resistant. Vale is also Brazil's largest rail operator and
largest private operator of ports.
Under the agreement Brookfield, Mitsui and FGTS will share
control of VLI under a shareholder's agreement, Vale said.
Mitsui already owns 15 percent of Valepar, which controls Vale
through a 53 percent voting stake.
Vale's VLI unit comprises the company's general cargo
operations, or operations not directly related to the movement
of Vale's own output of iron ore and other minerals.
The sale will free Vale from some of the burden of keeping
and expanding non-core freight operations, which the government
had pushed the company to assume in recent years. The
government's own efforts to build railways, ports, highways, and
airports have fallen years behind schedule in recent years,
leaving the country's ageing infrastructure stretched thin.
Recent efforts to attract private investment partners for
highways, high-speed rail and airports have also stalled over
factors such as high costs, rising political and economic risk
While VCI's rolling stock, locomotives and approximately 100
clients will have access to Vale's Carajas (EFC) and
Vitoria-Minas (FVM) railways, which move the bulk of Vale's more
than 300 tonnes of annual iron-ore output, the general cargo
company will not run those railways, Vale said.
VLI will also have access to Vale's ports and warehousing
facilities and it will run Vale's concessions for the Central
Atlantic (FCA) and North-South (FNS) railways.
All told, VLI has 10,700 kilometers (6,650 miles) of track,
600 locomotives and 13,000 rail cars.
FGTS, which is managed by Brazilian state-owned bank Caixa
Econômica Federal, is made up of millions of individual worker
accounts and financed by payroll taxes. While workers own the
funds, with few exceptions, they have no say over how the money
The government uses the money to make loans at below market
rates for public-interest projects. Brookfield, formerly known
as Brascan, is one of the oldest foreign investors in Brazil. It
began operations in the country in the 1890s financing
hydroelectric dams, urban streetcar system and later telephone
After losing many of its assets to nationalizations in the
1960s and 1970s, Brookfield now has large Brazilian investments
in banking and real estate.