Vale base metals IPO could prove to be a Bay Street bonanza

[December 05, 2014] By Euan Rocha and John Tilak

TORONTO (Reuters) - Brazilian mining giant Vale's plan to sell a stake in its base metals unit through a Toronto Stock Exchange listing could lead to the biggest IPO in Canadian history and a windfall in fees on Bay Street.

Vale confirmed a Reuters report about the potential sale this week, putting the size of the stake at 30 to 40 percent. It said the unit may be worth $30 billion to $35 billion, including the assumption of debt. The IPO could take place in the latter half of 2015, if market conditions allowed.

The IPO could raise $5 billion to $8 billion, making it the biggest in Canadian history, eclipsing Manulife Financial's record $2.12 billion flotation in 1999, according to Thomson Reuters data.

That could generate between $100 million to $250 million in underwriting, legal and accounting fees, said a top securities lawyer at a large Toronto firm.

"I'm absolutely sure there's lots of lawyers and bankers on Bay Street brushing up their Portuguese skills right now," said the lawyer, who asked not to be identified because his firm is one of several lobbying for a piece of the action.

Vale declined to comment on whether it has already retained advisors.

An offering would also boost the TMX Group's Toronto exchange. Canada's biggest bourse boasts a large number of precious metals miners but is starved of large base metals companies.

TMX's new Chief Executive Lou Eccleston, speaking at a media roundtable on Wednesday, declined to say whether the exchange operator has held any preliminary talks with Vale, but indicated he would welcome a TSX listing.

An IPO would help revive Bay Street, home to Canada's top banks and law firms. The resource heavy Canadian stock market has been bruised by the recent collapse in oil prices and an extended pullback in gold.

While both Canadian and U.S. banks will be involved in any offering, domestic ones are seen to have an edge due to their distribution capabilities.

Vale acquired much of its base metal portfolio via its acquisition of Canadian nickel mining giant Inco in 2007.

"This is great news for the Canadian market," said Colin Cieszynski, chief market strategist at CMC Markets. "It reminds everyone that Canada is a major player in the world's resource equity markets."

(Additional reporting by Nicole Mordant in Vancouver; Editing by Christian Plumb)

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