Brazil - Vale and Xstrata call off merger talks for now

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Mega-miners Vale of Brazil and Swiss-based Xstrata announced Tuesday that they have called off their merger discussions.

In a news release, Vale said it put forward a cash and shares offer for 100% of Xstrata. "Given that an agreement was not reached, discussions between the parties have been discontinued."

Mick Davis, Xstrata Chief Executive said, "While Vale and Xstrata continue to believe that a combination of the two companies could realize significant value for both sets of shareholders, we have not been able to reach agreement. We have therefore mutually decided to cease discussions.'

The deal was rumored to be worth as much as US$90 billion.

In its statement, Vale said it reserves the right to announce an offer or a possible offer within the next six months. Roger Agnelli, Vale CEO, told Brazilian journalists that "we can resume negotiations at any moment."

The Financial Times recently report that one of the stumbling blocks to the merger was that Xstrata's controlling shareholder Glencore, the world's largest commodity trading company, wanted to extend its marketing agreements to sell Xstrata-mined commodities including coal, nickel and zinc. The Agencia Estado news agency had previously report that Vale had offered $90.27 per share, while Glencore wanted $100.20 per share.

Agnelli told reporters that marketing was very important to Vale, adding "the whole question is not just price, but also principles, how to do business," the Associated Press reported.

Press reports said that Vale had arranged $50 billion in bank financing to fund its Xstrata bid. Two years ago, Vale bought Inco for $17.6 billion.