Brazilian steelmaker Companhia Siderurgica Nacional (CSN), a competitor and also a minor shareholder at flats steelmaker Usiminas, has questioned the company’s capital increase as well as some other company’s decisions in an open letter published at a major Brazilian newspaper this week.
According to CSN, the recently approved BRL 1 billion capital increase, seen by investors as needed to aid the struggling flats steelmaker, has a potential to diminish the power of minor shareholders. In addition to the claim, CSN said MUSA, Usiminas’ mining arm, had enough money to aid Usiminas, which was running out of cash by the time it sought the capital injection.
CSN said MUSA avoided distributing its revenues among Usiminas’ shareholders, a claim from CSN and other shareholders, and has then kept the money for itself. Usiminas is said to be negotiating with Sumitomo, which has a 30 percent stake in MUSA, for access to the money.
In the open letter, CSN has also criticized the contracts Usiminas has signed with its co-related companies, such as Nippon Steel, a major shareholder in Usiminas. CSN said the contracts reach up to BRL 20 billion, however, Usiminas’ document filings at the nation’s securities exchange commission, CVM, show a lower amount.
CSN said Ternium’s participation in Usiminas in 2010 has been “one of the major affronts to the rights of the minor shareholders committed so far in the Brazilian capital market.”
CSN also questioned the shutdown of Usiminas’ Cubatao mill, in the city of same name in the state of Sao Paulo as well as the dismissal of 2,000 workers from the mill.
CSN noted that it doesn’t make sense that Cubatao doesn’t fit for Usiminas, but it fits Ternium, which is said to be interested in the asset in a potential split of Usiminas’ assets.
CSN also questioned the fact that Ternium and Nippon Steel fight in Brazil but are “holding hands” in other countries, such as Mexico, where they co-own Tenigal.
“This capital increase will make it easier [for the shareholders] to split Usiminas,” the CSN letter argued, while the minority shareholders “watch stupefied the company’s degradation.”