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CSN Voting Rights in Usiminas Blocked by Brazilian Regulator

April 11, 2012

Cia. Siderurgica Nacional SA (CSNA3), Brazil’s third-largest steelmaker, lost voting rights on its stake in Usinas Siderurgicas de Minas Gerais SA two weeks before its rival holds a shareholders’ meeting to choose board members.

CSN, as the Sao Paulo-based company is known, is barred from buying more shares in Usiminas and will be fined 10 million reais ($5.5 million) if it doesn’t comply with guidelines, Brazil’s antitrust regulator, known as Cade, said in a statement late yesterday. CSN still has rights to dividends paid by Usiminas, Brazil’s second-largest steelmaker by output, it said.

CSN had been buying shares in Belo Horizonte, Brazil-based Usiminas for more than a year to have more influence in decisions made by its bigger competitor. The company held 20.14 percent of Usiminas’ preferred stock and 11.97 percent of its common shares as of Dec. 31, CSN said March 26.

Cade’s decision prevents CSN from appointing members to Usiminas’ board, fiscal council or other surveillance and management bodies, according to a separate statement sent by Usiminas to Brazil’s securities regulator yesterday. CSN can’t convert Usiminas preferred shares into voting ones or use its position as shareholder to obtain ”commercially sensitive information” about its rival, it added.

Usiminas plans to hold its annual shareholders’ meeting in Belo Horizonte on April 25, according to the company’s website. An official at CSN declined to comment yesterday.

The ruling by the antitrust regulators may speed up a decision by CSN to sell the stake in its rival as it may become less strategic, Barclays Plc analysts led by Leonardo Correa said in a research note yesterday.

’Less Appealing’

”One interpretation could be that this ruling should make CSN’s current position in Usiminas less appealing to hold on to,” the analysts wrote. ”We calculate that CSN would be losing close to 810 million reais on its investment.”

CSN will take “all measures” to preserve its investment in Usiminas, Investor Relations Executive Officer David Salama said during a conference call with investors March 27 without providing details.

CSN’s efforts to alter its rival’s management or control structure were thwarted last year when the Techint Group, through its Ternium SA and Tenaris SA units, agreed to pay 5.03 billion reais for a 27.7 percent voting stake in Usiminas, joining Nippon Steel Corp. in the controlling group of the steelmaker.

Usiminas voting shares fell 7.4 percent to 17.85 reais in Sao Paulo yesterday, the biggest drop in almost eight months. CSN was little changed at 16.55 reais.

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at

To contact the editor responsible for this story: Peter Millard at

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