Brazil's government opposes a plan by mining giant Vale to buy Swiss-based rival Xstrata, a senior official said Thursday, pouring cold water on a deal that analysts said could top $100 billion in one of the biggest mergers ever.
The government intends to instruct BNDESPar, the investment holding company of the state development bank, and Previ, the pension fund for Banco do Brasil, to vote against the deal, according to a close adviser to one of President Luiz Inacio Lula da Silva's cabinet members.
BNDESPar and Previ are members of the group of Vale's controlling shareholders and hold seats on the company's board of directors.
High-ranking government officials believe the deal is expensive, too complicated and not in Brazil's interest, the business daily Valor Economico reported Thursday. It cited an unnamed cabinet member who argued that the timing of the deal is not right, given the high cost Vale would have to pay for Xstrata.
The report also said the government was against the way Vale planned to structure the deal, since a large amount of voting shares would end up in foreign hands. The government views Vale, a former state-owned company and one of Brazil's largest exporters, as a strategic asset that should remain Brazilian, Valor said.