Misunderstandings involving Usiminas major shareholders, Ternium Techint and Nippon Steel, have put the company on a challenging situation, where a company split is being considered as a solution to end the legal fights between the two.
Unnamed sources quoted by local media said the company split is being discussed and could result in the separation of the company’s two units: the Cubatao mill, located in the city of same name in the state of Sao Paulo, and the Ipatinga mill, located in the city of same name in the state of Minas Gerais.
If an agreement is reached by the two diverging sides, Nippon Steel could assume the Ipatinga mill, while Ternium would own the Cubatao asset.
Such an alternative was proposed earlier in 2014, however, the alternative would make Usiminas, a major flats steelmaker in Brazil, lose competitiveness as it loses scale. As the outlook for the nation’s steel industry remains bearish in a scenario of a contracted demand for steel in the domestic market, the option is once again being analyzed.
A few weeks ago, the president of Techint, Paolo Rocca, sent a letter to the governor of Minas Gerais, Fernando Pimentel, saying the company needs to analyze all possibilities, including “the potential sale of stakes or the split of assets and mills.”
In case the company split proves to be the only solution to end the legal fights involving Ternium Techint and Nippon Steel, the deal isn’t an option for the short term, according to a media report.
A second media report said the move could happen within a year.