Bloomberg News

Nippon Steel Said to Be in Talks to Acquire Usiminas Stake

September 14, 2011

(Updates with closing stock prices in fifth paragraph.)

Sept. 14 (Bloomberg) -- Nippon Steel Corp., Japan’s largest steelmaker, and Brazil’s Gerdau SA are in talks to stave off a rival $2.9 billion bid for a stake in Usinas Siderurgicas de Minas Gerais SA, or Usiminas, said two people familiar with the negotiations.

Nippon Steel may exercise its right of first refusal and buy out its partners in the group that controls Usiminas to thwart the takeover offer from Cia. Siderurgica Nacional SA, or CSN, said the people, who asked not to be named because the talks are private. Nippon Steel would then resell to Gerdau part of the 26 percent stake in Usiminas now held by partners Camargo Correa SA and Grupo Votorantim, they said.

CSN, Brazil’s third-largest steelmaker, has been buying Usiminas stock in the market since at least January, when it said it may boost holdings to a level that may alter management or the control structure. A move by Nippon Steel to block CSN and gain control of Usiminas would help the company pursue a global expansion, analyst Kazuhiro Harada said. Speculation of a deal helped fueled a rally in Brazil steel stocks today.

“Brazil is one of a few very important bases for Nippon Steel as it seeks to expand globally,” said Harada, a SMBC Nikko Securities Inc. senior analyst. Usiminas “is best positioned to target the U.S., Latin America and Europe and Africa.”

Usiminas rose 3.5 percent to 12.11 reais in Sao Paulo. Gerdau climbed 3.9 percent to 14.36 reais and CSN rose 2.4 percent to 15.67 reais. Nippon Steel gained 0.9 percent to 223 yen in Tokyo.

‘Calling Attention’

The possibility of a deal “is calling the attention of the market to this sector,” Leonardo Alves, an equity analyst at Link Investimentos, said by telephone from Sao Paulo.

CSN Chief Executive Officer Benjamin Steinbruch has been in talks with Camargo Correa and Votorantim and offered to buy their voting stock for 40 reais each, valuing the 26 percent stake at 5 billion reais ($2.9 billion), said the same people.

Gerdau is more likely to earn the backing of the government to lead a consolidation in the steel industry to compete in the global market, the people said. Brazil’s government is seeking to boost supplies of the metal used in construction for infrastructure projects ahead of the 2014 World Cup and 2016 Olympic Games.

Nippon Steel, based in Tokyo, aims to derail CSN’s offer following a disagreement with the steelmaker over how to manage their Namisa iron-ore unit in Brazil, said the people. Nippon Steel, as part of a group that included Posco and Itochu Corp., agreed in 2008 to buy 40 percent of Namisa from CSN for $3.12 billion. Nippon Steel sold its stake in June.

Boosted Holdings

CSN, which is based in Sao Paulo, disclosed Aug. 19 that it raised its stake in Usiminas to 15.15 percent of preferred shares and 11.29 percent of common stock. Nippon Steel, Camargo Correa, Votorantim and Mitsubishi Corp. control Usiminas with 53.8 percent of the ordinary shares.

Hiroshi Nakashima, a spokesman for Nippon Steel, declined to comment. Gerdau, based in Porto Alegre, Brazil, said in an e- mailed statement yesterday it’s not involved in negotiations to buy Usiminas. CSN and Usiminas officials declined to comment.

Nippon Steel is also considering making an offer for the 10.1 percent voting stake held by the pension fund for Usiminas employees, which CSN is also trying to buy, according to the people. The fund has hired Credit Suisse Group AG to manage the sale, they said.

Usiminas, which is based in Belo Horizonte, Brazil, has sought backing from Brazil’s government to block CSN’s takeover attempt, a government official familiar with the issue said yesterday. Usiminas representatives and antitrust officials from the finance and justice ministries met last week to discuss the stake purchases, said the official, who asked not to be identified because the meetings were private.

Usiminas confirmed in an e-mailed statement yesterday it met with antitrust officials to “seek clarification from a competitive standpoint” following CSN’s share purchases.

--With assistance from Juan Pablo Spinetto in Rio de Janeiro and Masumi Suga in Tokyo. Editors: Jessica Brice, Carlos Caminada

To contact the reporter on this story: Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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