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Report: Brazilian pension funds selling part of combined Vale stake

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Report: Brazilian pension funds selling part of combined Vale stake

Brazilian pension funds are considering selling a portion of their combined stakes in Vale SA through a public offering, Reuters reported March 21, citing four anonymous sources.

If BNDESPar, the investment branch of state development bank BNDES, participates in the sale with a portion of its stake, the transaction could be worth up to 8 billion Brazilian reais, or US$2.4 billion.

Should BNDESPar join the transaction, it is expected to offer 10% to 12.5% of its stake, resulting in a combined sale of between 2.9% and 3.6% of Vale's total share capital.

The funds, which include Previ, Petros, Funcef and Fundação Cesp, jointly own 21.3% of Vale, while BNDESPar holds a 7.8% stake.

According to the sources, Japanese trading house Mitsui & Co. Ltd. and holding company Bradespar SA are not planning to sell their Vale stakes.

The rumored share sale surfaced after the iron ore major streamlined its ownership structure in October 2017. Earlier in 2017, the majority of Vale's class A preferred shareholders swapped their stock for common Vale shares to dissolve investment holding company Valepar SA into Vale.

Controlling shareholders were subsequently barred from selling Vale holdings, with a six-month lockup period ending in February for half of the controlling shareholders and the remaining shareholders subject to a lockup period through 2020.

The pension funds and BNDESPar were initially looking to sell their stakes in April, but one of the stakeholders recently started considering delaying until 2019 due to a risk of election-related volatility in Brazil, according to one of the sources.

According to the Reuters report, the sale could help Brazilian pension funds Petros and Funcef cover payments to retirees as they recover from losses and corruption investigations into alleged bad investments.

As of March 21, US$1 was equivalent to 3.29 Brazilian reais.