SAO PAULO, July 15 (Reuters) - Investors may be underestimating the benefits of a reorganization plan at Gerdau SA that could help the company, the largest steelmaker in the Americas, spin off its North American unit in a few years, an analyst at Banco Fator said on Wednesday.
Shares of Gerdau plunged as much as 7 percent on Tuesday after the announcement of the plan, under which the company would buy the remaining stakes that it does not won in its units Gerdau Aços Longos SA, Gerdau Açominas SA, Gerdau Aços Especiais SA and Gerdau América Latina Participações SA.
According to Artur de Almeida Losnak, Fator’s commodities analyst, the cost of the buyout could be compensated for by Gerdau’s ability to integrate the units and extract cost and expense savings from the units. “Markets might be failing to see the long-term benefits of the deal, despite its cost,” he added.
The simplification of Gerdau’s corporate structure achieved through the reorganization could also pave the way for divestments or even a listing of one or more of the business units, Losnak said, adding this might not happen in the short term.
In his opinion, the most notable of the business units, Gerdau North America, could be listed in the future. Gerdau will now also have separate Brazilian and South American divisions, along with an existing specialty steel business.
Gerdau said on Tuesday the reorganization was necessary to make it more competitive. The company declined to comment beyond the original securities filing.
Shares of Gerdau were up 1.8 percent on Wednesday afternoon in Sao Paulo, recovering from Tuesday’s tumble.
$1 = 3.13 reais Reporting by Guillermo Parra-Bernal; additional reporting by Stephen Eisenhammer; Editing by Steve Orlofsky