London-based Billiton will pay US$327 million to acquire an indirect 2% stake in Companhia Val do Rio Doce (CVRD), the Brazilian iron ore and aluminum group, at a 50% premium to the current market price.
The agreement calls for Billiton to pay $327 million to acquire a 67% stake in Sweet River Investments. Sweet River holds 12% of Valepar, the controlling CVRD shareholder with a 27% direct stake.
Billiton justifies the 50% premium price paid, on a number of grounds, including: a put arrangement that will allow it to exit at a small profit if its ambitions are not realized; board representation at Valepar; and pre-emptive rights on any changes in the complex CVRD holding structure.
The deal is part of Billiton’s growing involvement in South America. The company already produces aluminum in Brazil and nickel in Colombia, generating operating profits of US$95 million in the last six months of 1999.
Billiton’s recent achievements in the continent include launching a copper joint venture with state-owned Corporacion Nacional Del Cobree de Chile (Codelco) to exploit their patented BioCOP metallurgical recovery process, and forming a coal joint venture with Anglo American and Glencore in Colombia.
Billiton also has operations in Australia, South Africa and Suriname, as well as trading operations in the Netherlands.
Besides being one of the world’s largest producers of aluminum, Billiton is the world’s largest exporter of thermal coal and has a controlling interest in the world’s leading integrated producer of ferrochrome and ferromanganese. Billiton also has a 50% interest in Richard Bay Minerals, the world’s largest producer of titanium dioxide slag.
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