(Recasts to add details on Schvartsman, outgoing CEO Ferreira, share performance throughout)
By Guillermo Parra-Bernal
SAO PAULO, March 27 (Reuters) - Vale SA surprised investors with the appointment of Fabio Schvartsman as chief executive officer on Monday, choosing a commodities industry veteran to lead transformation of the world’s No. 1 ore producer into a company with dispersed share ownership.
Schvartsman, who has been the CEO of Klabin SA, Brazil’s largest paper and cardboard producer, for the past six years, had not figured in media reports as a potential replacement for CEO Murilo Ferreira. The departure of Ferreira was announced last month.
In a career spanning four decades, Schvartsman occupied key positions in companies such as fuel distribution giant Ultrapar Participações SA, phone carrier Telemar Participações SA and U.S. oil driller San Antonio International. Vale’s board picked him from a list prepared by executive recruiting firm Spencer Stuart.
Schvartsman faces the task of engaging Vale’s investors in a plan to phase out a 20-year controlling shareholder pact and merge the company’s two classes of stock into a single one. The plan was announced last month, the same day that Ferreira announced he would quit when his term expired in late May after six years at the helm of the mining giant.
A more dispersed shareholder structure is key to enhancing transparency and stifling interference from politicians, who for years have pressed Vale to invest in non-core projects. Some top shareholders proposed that Ferreira stay in the job for another year, Reuters reported in January.
The appointment of Schvartsman “minimizes investor concerns on political interference at Vale, which we view positively,” Leonardo Correa, a senior analyst at Banco BTG Pactual, said in a client note.
Preferred shares, Vale’s most widely traded class of stock, rallied 2.5 percent to 27.97 reais, while common shares gained 1.3 percent to 29.39 reais. Both stocks are up 3.5 percent since Reuters reported Vale’s reorganization plan in January.
Schvartsman’s surprise appointment was welcomed by several analysts and investors, who expect the executive to replicate the job he did at Klabin.
“Despite being new to the mining sector, we believe that Schvartsman can make a smooth transition to Vale,” said Marcos Assumpção, a senior analysts with Itaú BBA in São Paulo.
Under Schvartsman, Klabin undertook rapid growth through some capital spending plans but got caught in a downbeat cycle marked by rising debt and Brazil’s worst recession on record. Still, he managed to boost operational margins to about 35 percent, from about 25 percent when he assumed.
Currently, units of Klabin are some of the most expensive among Latin American paper and pulp producers, trading at about 7 percent premium to global peers, according to Thomson Reuters calculations.
In a statement, Klabin thanked Schvartsman for “his commitment to participating actively in the transition plan,” noting that the paper producer’s board will give continuity to his job.
Reuters had reported some of Ferreira’s lieutenants and executives with Vale experience were being considered for the job. (Additional reporting by Anthony Boadle in Brasilia and Roberto Samora in São Paulo; Editing by Diane Craft and Bill Trott)