Vale Announces Stake Sale in Florestar - Analyst Blog

Mining giant Vale S.A. VALE recently announced plans to sell its stake in Vale Florestar Fundo de Investimento em Participações (FIP Vale Florestar) to a subsidiary of Suzano Papel e Celulose. Total value of the sale is estimated at R$205 million.

FIP Vale Florestar deals with reforestation, primarily in Brazil. It has planted over 45,000 hectares of eucalyptus and protected and recovered roughly 95,000 hectares of native forests.

The divestiture comes as part of Vale's strategy to focus on core productive assets and hive off others. Along with Vale, other stakeholders of Florestar including BNDESPar, Petros and FUNCEF, will also sell off their stake, thereby making Suzano Papel e Celulose the sole owner of the property.

Earlier in Apr 2014, Vale sold 20.0% and 15.9% of its stake in VLI S.A. to Mitsui for R$1.5 billion and FI-FGTS for R$1.2 billion respectively. This transaction was originally announced in Dec 2013. Also, in the fourth quarter of 2013, Vale had entered into an agreement to sell additional 26.5% of its stake in VLI to an investment fund managed by Brookfield Asset Management. The transaction has been valued at R$2 billion and its completion is subject to customary closing conditions. Post completion, Vale will hold 37.6% stake in VLI S.A.

Additionally, on Dec 26, 2013, Vale sold off all the common shares of its stake in Log-in Logística Intermodal S.A. Over 28.7 million shares were sold at a price of R$8.11 per share to generate proceeds of roughly R$233 million.

Also, on the same day, Vale concluded the previously announced sale of its 44.25% stake in Fosbrasil to Israel Chemicals Ltd. Fosbrasil, located at Cajati, Sao Paulo, is a producer of purified phosphoric acid. The transaction was valued at over $52 million.

With all these stake sales, we expect the company to be in a better position to focus on its productive assets and thereby, increase revenues and profits. With a market capitalization of $65 billion, Vale currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Kumba Iron Ore Ltd. (KIROY), Universal Stainless & Alloy Products Inc. USAP and Alderon Iron Ore Corp. AXX. While both Kumba Iron Ore and Universal Stainless & Alloy Products sport a Zacks Rank #1 (Strong Buy), Alderon Iron Ore holds a Zacks Rank #2 (Buy).

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