Shareholders of Vale SA on Tuesday approved a share conversion plan, its press office said, in a bid to boost transparency, give equal votes to all shares and limit the possibility of government meddling in the world's No. 1 iron ore producer.
Shareholders approved all seven items on the corporate restructuring agenda, which is a first step toward giving the company dispersed share ownership - where no major shareholder controls decision making at the firm.
Minority holders backed the extension for up to three and a half years of an agreement by controlling shareholders grouped under holding company Valepar SA to maintain control. The assembly also approved Vale's takeover of Valepar and a subsequent merger of Vale's two types of stock into a single common one.
Under terms of the share conversion, holders of Vale's Class A preferred shares who join the share conversion voluntarily will receive 0.9342 of common stock.
To ensure completion of the plan, Vale would pay owners of Valepar a 10 percent premium for their shares, implying a 3 percent dilution for all shareholders. The former Valepar owners can sell the equivalent of up to 22 percent of Vale's common shares after a six-month lockup period starting in August expires, provided they keep a 20 percent stake by November 2020.
The change represents a milestone in a country long hobbled by corporate governance abuses and reorganizations that hampered minority investors in most cases. Reuters reported the plan on Jan. 19, citing people familiar with it.
A simpler shareholder structure in which Vale's board, and not Valepar, will decide strategy, and higher liquidity stemming from the end of the Valepar lockup period could trigger a sharp rise in Vale's market capitalization, analysts said.
Investors expect Tuesday's vote will help improve investor perceptions of Vale, translating into a faster convergence of Vale's share prices to those of rivals, and a decline in the Brazilian miner's cost of capital.
The plan also limits government interference in Vale - an aspect that weighed down the company's stock during President Dilma Rousseff's five years in office.
Still, the Brazilian government will keep a golden share, a legal mechanism that allows it to fend off hostile takeover attempts and shape strategic decisions.
The partners in Valepar include pension fund Previ Caixa de Previdência - currently Vale's largest shareholder - Bradespar SA and Japan's Mitsui & Co, among others.