Usiminas CEO Fired as Shareholder Ternium Says Pact ViolatedJuan Pablo Spinetto and Ney Hayashi
Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker, fired its Chief Executive Officer Julian Eguren, a move that shareholder Ternium SA said stems from a fight among the company’s controllers.
Eguren will be temporarily replaced by Romel Erwin de Souza, the Belo Horizonte, Brazil-based company known as Usiminas said today in a regulatory filing, adding that the board also approved removing members Paolo Bassetti and Marcelo Chara. Ternium, part of Usiminas’ controlling group, said in a separate statement that the decision violates a shareholder accord between the companies that control the steelmaker.
The dispute comes less than three years after Ternium and Tenaris SA, both controlled by Italian billionaire Paolo Rocca’s family through the Techint Group, agreed to pay about 5 billion reais ($2.07 billion) for a 27.7 percent voting stake in Usiminas, joining Japan’s Nippon Steel & Sumitomo Metal Corp. to control of the company. Along with the Usiminas’s workers pension fund, the group holds a combined 63.8 percent stake in the steelmaker’s voting capital.
As part of the deal, Eguren, who ran Ternium in Mexico, became CEO in January 2012.
“Usiminas’ shares should suffer the consequences of a lack of agreement among the controlling group,” Banco Bradesco BBI SA analysts led by Alan Glezer said in a note to clients. “This negative pressure is likely to be amplified by weak conditions for flat steel sales in Brazil in the second half of 2014.”
Prefered shares of Usiminas dropped 5.8 percent to 7.12 reais at the close in Sao Paulo today, the lowest since July 12, 2013. The stock, which traded at 3.2 times its three-month daily average volume, was the worst performer on Brazil’s benchmark Ibovespa benchmark, which climbed 2.2 percent.
Five board members voted for the CEO’s dismissal and five opposed it, with Chairman Paulo Penido Pinto Marques breaking the tie, according to Usiminas’s filing, which didn’t elaborate on the management changes. A Usiminas official in Belo Horizonte said the company didn’t have further comments when contacted by Bloomberg News today.
“The dismissal of the officers is part of a controversy that arose within the Usiminas control group with respect to rules applicable to the appointment of senior managers,” Ternium said in its statement. The votes cast by members appointed by the Nippon Steel’s group violated the shareholders agreement, it said.
Tokyo-based Nippon Steel didn’t immediately reply to a comment request from Bloomberg News at their Sao Paulo offices.
The dispute at Usiminas also emerges as steel sales in Brazil drop with the economy slipping into recession in the second quarter. In addition, iron-ore prices have slumped 42 percent in 2014 to a five-year low, curtailing profits at Usiminas’ mining unit.