Vale (VALE3) receives offers by segment of base metals division, newspaper says; Morgan Stanley sees the news as positive

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Valley (OK3) has received binding proposals for the sale of a 10% stake in its base metals division, daily Valor Econômico reported Thursday, adding that the offers will be reviewed by the company’s board on May 25.

The value of the minority stake is estimated at $2.5 billion, according to the report, citing unnamed sources.

The company will continue to evaluate the proposals before proceeding with negotiations, he added.

Commenting on the news, Morgan Stanley recalls that Vale has been exploring possible alliances for the nickel/copper business, since one of the company’s strategic priorities is to increase the value that the market attributes to the base metals division and attract capital competitive to business. growth.

“If confirmed, we see as positive that the binding offers are already in place, as it indicates that the process is moving forward.”

The bank also cites that, during Investor Day, in December 2022, the mining company’s management indicated that it was in advanced negotiations with different potential partners for the sale of up to 10% of the base metals division.

They mentioned that they were looking for a strategic partner that could raise the ESG profile of the base metals business, enhance technical capabilities and accelerate value creation.

The US$2.5 billion valuation for a 10% stake mentioned by Valor implies a multiple of 9 times the 2024 earnings before interest, taxes, depreciation and amortization (EBITDA) of Vale’s base metals segment. This compares to Vale’s multiple of 5.3 times, the nickel pair average of 6.1 times and the copper pair average of 7.6 times.

“We believe a premium in this case is supported by Vale’s low asset value – mainly nickel – which is based on 1) an attractive growth pipeline and 2) low carbon dioxide emissions. The bank has an overweight recommendation (above market average exposure, equivalent to sell) for Vale’s ADR (US traded share receipt), with a US$18 price target, or appreciation potential of 28% against the close of this Thursday (18).

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