UPDATE: UBS Thinks Vale (RIO) Will Look For Higher Copper Exposure Through M&A; Sees Possible Deal With Freeport (FCX)

June 24, 2008 3:52 PM EDT

UPDATE: UBS commented on Vale (NYSE: RIO) after an investor tour last week. The firm said the tour didn't bring a lot of new things, but helped them better understand why the company is doing the $15B equity offering. UBS said the share issue was a defensive move to improve financial flexibility ahead of a possible acquisition. UBS believes Vale will look for higher copper exposure through M&A.

Discussing the M&A topic further, UBS said they understand Vale is considering a number of alternatives, but has not initiated negotiations with any potential candidate. UBS said the talks tend to revolve around the usual suspects (Xstrata, Anglo American (Nasdaq: AAUK), Freeport (NYSE: FCX) and Alcoa (NYSE: AA) ). They said, "We tend to believe Vale would be more inclined to bid for Freeport, which would give it very large copper exposure, than the other above mentioned assets. Freeport may have some Indonesia-related issues (country risk), but we do not view them as impossible to deal with."

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