SAO PAULO, March 6 (Reuters) - The board of Litel Participações, which holds Brazilian pension funds' stakes at miner Vale SA, has proposed to distribute shares of the miner to the funds.
According to a securities filing, the holding company Litel will distribute to its shareholders 201.14 million common Vale shares. Litel is one of Vale's largest shareholders, with a 21 percent stake.
Half of this stake, around 11.3 percent, was locked up for six months after last year's conversion of all classes of stock into common, concluded in September. The period in which shareholders were forbidden to sell their shares ended last month.
Litel holds the Vale stakes owned by pension funds Previ, Petros and Funcef, of the employees of state-controlled companies Banco do Brasil SA, Petroleo Brasileiro SA and Caixa Economica Federal.
The proposal to distribute the stocks will be voted in a shareholders meeting on March 21.
"If Litel concludes the transaction, pension funds will directly own Vale shares and may sell their stakes whenever they want. If all the Litel partners sell their shares, the transaction could reach 8.8 billion reais ($2.8 billion)," Credit Suisse analysts said in a note to clients.
Itaú BBA SA told clients in a note that such a transaction could pressure Vale share prices in the short term, but could be beneficial over the longer term by raising the company´s liquidity by 10 percent and raising the number of board members appointed by minority shareholders.
The report said the bank forecasts that Vale shareholders may sell between 13 billion and 17 billion reais, including stakes held by the investment arm of state bank BNDES.
Other shareholders in Vale´s controlling block are Bradespar SA, and Mitsui & Co.
Vale shares fell 0.5 percent on Tuesday to close at 43.49 reais, paring back this year's gains to 8.2 percent. ($1 = 3.2085 reais) (Reporting by Tatiana Bautzer and Paula Laier Editing by Matthew Lewis)