Brazil’s Vale shareholders approve corporate reorganization (Reuters U.S. – June 27, 2017)

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Minority holders backed the extension for up to three and a half years of an agreement by controlling shareholders grouped under holding company Valepar SA to maintain control. The assembly also approved Vale’s takeover of Valepar and a subsequent merger of Vale’s two types of stock into a single common one.

Under terms of the share conversion, holders of Vale’s Class A preferred shares who join the share conversion voluntarily will receive 0.9342 of common stock.

To ensure completion of the plan, Vale would pay owners of Valepar a 10 percent premium for their shares, implying a 3 percent dilution for all shareholders. The former Valepar owners can sell the equivalent of up to 22 percent of Vale’s common shares after a six-month lockup period starting in August expires, provided they keep a 20 percent stake by November 2020.

The change represents a milestone in a country long hobbled by corporate governance abuses and reorganizations that hampered minority investors in most cases. Reuters reported the plan on Jan. 19, citing people familiar with it.

A simpler shareholder structure in which Vale’s board, and not Valepar, will decide strategy, and higher liquidity stemming from the end of the Valepar lockup period could trigger a sharp rise in Vale’s market capitalization, analysts said.

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