March 23, 2017 / 8:25 PM / a year ago

UPDATE 1-Board of Brazil's Usiminas removes CEO Souza -sources

(Recasts to add details on ouster, replacement, background, share performance throughout)

By Guillermo Parra-Bernal and Alberto Alerigi Jr

SAO PAULO, March 23 (Reuters) - The board of Brazilian steelmaker Usinas Siderúrgicas de Minas Gerais SA removed Chief Executive Officer Rômel de Souza on Thursday after several board members accused him of breaching company policy during negotiations with a subsidiary last year, three people with knowledge of the matter said.

Seven of Usiminas’ 11-member board voted to fire Souza and replace him with Sérgio Leite, a longtime executive who had a brief stint as CEO last year, said the people, who requested anonymity due the sensitivity of the matter. Leite’s appointment has immediate effect, two of the people said.

This is the second time in two years the board has voted to fire Souza as head of Brazil’s largest listed flat steelmaker. Last May, the board ousted him and appointed Leite as his replacement. Souza was reinstated weeks later, following a court injunction.

A spokesman for Belo Horizonte, Brazil-based Usiminas did not return calls or messages seeking comment on the matter. Neither Souza nor Leite were available for comment.

Reuters reported on Wednesday that the board had convened an extraordinary meeting to discuss Souza’s unilateral decision to tap excess cash from mining subsidiary Musa Mineração Usiminas SA in November.

One of the people said Souza’s alleged breach of the company’s compliance rules was linked to the Musa negotiations. The original plan collapsed on Jan. 11, but a March 3 accord between the companies allowed Usiminas to tap about 700 million reais ($223 million) of Musa’s excess cash.

Souza’s dismissal has the potential of extending a 2-1/2-year rift between the steelmaker’s two top shareholders, Nippon Steel & Sumitomo Metal Corp and Ternium SA , one of the people said. Ternium and Nippon Steel are battling over control of Usiminas, which is wrestling with Brazil’s worst-ever recession and high debt.

Reuters had reported on Jan. 13 that Souza and Musa President Wilfred Brujin had agreed to the use of the unit’s excess capital without the steelmaker’s board permission. The document that Souza, who is also the chairman of Musa, signed was a non-binding memorandum of understanding.

Preferred shares, Usiminas’ most widely traded class of stock, shed 0.5 percent to 4.18 reais in late afternoon trading in São Paulo. The stock is up 2 percent this year.

$1 = 3.1358 reais Additional reporting by Brad Haynes in São Paulo; Editing by Lisa Shumaker

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