Vale share overhang removed after tax settlement, UBS says


Vale's (VALE +3.7%) agreement to pay $9.7B over the next 15 years to settle a decade-long dispute over taxes removes a major overhang on the stock performance, and Vale can afford the $2.6B up-front payment with its cash pile and recent divestitures, UBS says.

The tax settlement, iron ore price strength and a relatively attractive valuation should support the shares in the near term, UBS says while cautioning of a potential downward production revision for 2014, possibly as early as Vale day in the coming week.

Using net present value, Vale says the tax bill is equivalent to $6.3B, or 8% of its market cap.

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