(Adds share performance, paragraph 10)
By Tatiana Bautzer and Guillermo Parra-Bernal
SAO PAULO, Jan 19 (Reuters) - Leading shareholders of Vale SA are close to endorsing a plan to turn the world’s No. 1 iron ore producer into a company with dispersed share ownership within six years, two people familiar with the talks said.
Bradespar SA, Mitsui & Co and several Brazilian pension funds are negotiating a new shareholder accord that would give Vale dispersed share ownership - where no major shareholder controls decision making at the company - once the agreement expired in six years time, according to the people, who asked for anonymity since talks are underway. Negotiations could be concluded by late February or early March, these people said.
The current 20-year shareholder accord expires in April. Holding company Bradespar and pension fund Previ proposed the conversion of Vale’s different types of stock into a single common one as the first step towards transforming the mining giant into a company with dispersed share ownership, the first person said.
By changing Vale’s corporate structure radically, Bradespar and Previ want to boost the company’s allure to investors. The plan could result in enhanced transparency and limited government meddling - an aspect that weighed down Vale’s stock during President Dilma Rousseff’s five years in office that ended with her impeachment last year.
“The situation is advantageous to the controlling bloc, because the shareholders acknowledge that there is so much value to be captured with this initiative,” said the first person.
If shareholders can agree on the new six-year accord, the plan would be presented to Vale’s board around March and to shareholders briefly after, the people said. It prevents Bradespar and Mitsui from paying a large premium to Previ, Vale’s No. 1 shareholder, to keep sharing decision-making powers, the people said.
So far, there are no ongoing discussions between Vale’s top shareholders to replace Chief Executive Officer Murilo Ferreira, whose term expires halfway through the second quarter, the people said.
One of the people said they may propose that Ferreira, who took the helm of Vale in May 2011, stay on for at least another year.
Vale confirmed in a statement on Thursday morning that a new agreement was under discussion among shareholders, without giving further details. It said the dispersing of share capital was not being discussed at company level.
Preferred shares in Vale fell 2.2 percent on Thursday, subtracting the most points from Brazil’s benchmark Bovespa stock index, after reaching a 38-month high on Wednesday. Common shares in Bradespar fell 3 percent, paring back this year’s gains to 34 percent.
The media offices of Bradespar, owned by Banco Bradesco SA, and Previ did not have an immediate comment. Efforts to speak to Mitsui’s press office outside working hours in Japan were unsuccessful.
The improved corporate governance framework stemming from a new shareholder accord could help Vale’s shares soar, cutting their gap in relation to global mining peers, Banco BTG Pactual analyst Leonardo Correa said in a client note.
The move could unleash up to $18 billion in value for shareholders of the Rio de Janeiro-based miner, he said.
Preferred shares, Vale’s most widely traded class of stock, gained 3.3 percent to 29.44 reais on Wednesday, while common shares added 5 percent to 32.11 reais.
The premium to which common shares trade relative to the preferred ones moved significantly after newspaper Valor Economico reported on the plan on Wednesday.
Other members of the bloc that controls Vale via investment holding company Valepar SA include pension funds Petros Fundação, Funcef and Fundação Cesp, as well as state development bank BNDES.
The strategy would replicate the move that helped put planemaker Embraer SA out of the government’s control in 2006, the people said.
In the case of Embraer, the share conversion was done simultaneously with the scrapping of the planemaker’s shareholder accord, although the government kept a so-called “golden share” that vetoes any type of hostile takeover.
The Brazilian government also has a golden share in Vale. (Additional reporting by Bruno Federowski and Aluísio Alves in São Paulo and Marta Nogueira in Rio de Janeiro; Editing by Andrew Hay)