(Adds details on Previ purchase, background on the shareholder dispute, share performance in paragraphs 1-9)
By Guillermo Parra-Bernal and Alberto Alerigi Junior
SAO PAULO, Oct 2 (Reuters) - Steelmaking group Ternium SA agreed on Thursday to pay 616.7 million reais ($249 million) for an additional stake in Brazilian rival Usiminas, as a tussle for control of the country’s largest flat steel producer heats up.
Under terms of the deal, Ternium acquired 51.4 million common shares from Caixa de Previdência dos Funcionários do Banco do Brasil, the pension fund owned by workers of state-run Banco do Brasil SA known as Previ. Ternium paid 12 reais per common share of Usiminas, representing an 82 percent premium to the stock’s close on Wednesday.
Following the purchase of the Previ stake, a Ternium-led group will own 191.1 million common shares of Usiminas, or about 38 percent of the latter’s voting capital. Usiminas is formally known as Usinas Siderúrgicas de Minas Gerais SA.
Ternium, which is controlled by Italian-Argentine industrial conglomerate Techint Group, joined Japan’s Nippon Steel & Sumitomo Metal Corp as part of Usiminas’ controlling bloc in November 2011.
“During the term of the Usiminas shareholders agreement, Ternium will be required to vote these shares in accordance with the decisions of the Usiminas controlling group,” Ternium said in a statement.
Last week, a rift between Nippon Steel, which owns slightly less than 30 percent of Usiminas, and Ternium ended with the dismissal of Julián Eguren as chief executive of Usiminas. Eguren, who since taking office in early 2012 brought Usiminas back to profitability by slashing costs and easing bottlenecks, was allegedly fired over bonuses.
Apart from questioning future strategy and capital allocation under a new chief executive, investors worry that Eguren’s departure may worsen a drop in earnings amid a sharp slowdown in Brazil, slumping global iron ore and steel prices and a higher share of exports in the company’s sales mix. Steel products in Brazil sell at a higher price than globally.
Ternium’s Thursday move signaled that the rift with Nippon Steel is far from over, fanning the odds that differences may be settled in court, analysts told Reuters asking not to be named. Since Sept. 26, when the dismissal of Eguren was announced, preferred shares of Usiminas have shed 15 percent, while common shares dropped 8.6 percent.
As well as Usiminas, Nippon Steel also controls a steel plate business in Mexico jointly with Ternium. “It could present a risk if the conflict between the two companies had a negative impact on this operation too,” Atsushi Yamaguchi, an analyst with UBS Securities, said this week, referring to the companies’ Mexico venture.
Ternium’s purchase of the Previ stake will not automatically trigger a tender offer to minority shareholders, the statement said.
$1 = 2.4952 Brazilian reais Editing by Diane Craft and Cynthia Osterman