Bloomberg News

Usiminas Said to Seek Government Support to Fight CSN Bid

September 13, 2011

(Updates with Usiminas confirmation in second paragraph.)

Sept. 13 (Bloomberg) -- Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker, is seeking government support to fight a potential takeover or stake increase by Cia. Siderurgica Nacional SA, saying such a move would hurt competition, said a government official familiar with the issue.

Representatives from Usiminas, as the Belo Horizonte, Brazil-based steelmaker is known, met with antitrust officials at the finance and justice ministries last week after CSN raised its stake in the company, according to the person, who asked not to be named because the meetings weren’t public. Usiminas confirmed in an e-mailed statement it met with officials to “seek clarification from a competitive standpoint.”

Sao Paulo-based CSN, Brazil’s third-largest steelmaker by output, has been buying shares since at least January, when the company said it may boost investments in Usiminas to a level that could alter management or the control structure. Nippon Steel Corp., Votorantim Participacoes SA and Camargo Correa SA together hold 53.8 percent of Usiminas’s voting stock.

“Steel prices are already set internationally, so I don’t think we’ll have a problem of there being a monopoly within Brazil,” said Leonardo Brito, an equity analyst at Rio de Janeiro-based hedge fund Teorica Investimentos. “Perhaps some types of specialty steel that we only have in Brazil may cause a problem, but I think they would end up resolving that.”

Antitrust Concerns

Usiminas is seeking to fight off a potential bid on antitrust grounds, said the person, adding that CSN may be fined for not notifying antitrust regulators of the stake acquisition. The Justice Ministry has asked CSN and Usiminas to provide more information on the share purchase and may investigate effects of a possible combination on the domestic market, said a ministry press official, who can’t be named, citing internal policy.

CSN said Aug. 19 it raised its stake to 15.15 percent of Usiminas’s preferred shares and 11.29 percent of common stock.

CSN’s press office declined to comment and said it hadn’t yet been notified about the ministry request for information. The Justice Ministry press official also confirmed the meeting between Usiminas and the head of the ministry’s antitrust arm, without providing details on the topic of discussions.

Usiminas’s common shares rose 4.6 percent to close at 24.40 reais, the second-biggest gainer on the Bovespa index today.

--Editors: Jessica Brice, Robin Saponar.

To contact the reporter on this story: Arnaldo Galvao in Brasilia at agalvao1@bloomberg.net; Juan Pablo Spinetto in London at jspinetto@bloomberg.net.

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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