Squabbling Steelmaker Owners Unite Against Boardroom Rivals

  • Usiminas controllers file injunctions against CSN nominees
  • Minority holder CSN says its nominees are independent

The controlling shareholders of embattled Brazilian steelmaker Usiminas have finally found something to agree on: they both want to overturn a decision that allowed rival CSN to nominate two board members.

Nippon Steel & Sumitomo Metal Corp. and Techint Group, which control Usiminas through a shareholder pact, filed separate injunctions this week, according to court documents. If granted, the two CSN-nominated directors may be banned from participating on Usiminas’ board just weeks after being elected.

Techint and Nippon are fighting a decision by Brazil’s antitrust agency Cade to allow Cia. Siderurgica Nacional SA, as CSN is known formally, to nominate independent board members in its capacity as a minority shareholder. Usiminas has a board meeting on May 12 in which directors may discuss possible management changes.

A unit of Nippon filed the request with the Minas Gerais state court, while Techint’s Ternium Investments made its request with a federal tribunal in Brasilia. Neither company provided comment on the court petitions. Usiminas also filed a petition Tuesday in a federal tribunal to annul Cade’s decision.

The issue is uniting the two controllers after years of disputes over how to run Usiminas. Their latest battle is over dealing with mounting losses and evaporating cash reserves amid a global steel glut exacerbated by Brazil’s deepest recession in a century.

Capital Increase

In March, Usiminas shareholders approved a 1 billion-real ($288 million) capital increase, a requirement for bank creditors granting the company a 120-day standstill deal. CSN has filed a series of legal claims against Usiminas, one of which aims to derail the planned capital increase.

CSN, based in Sao Paulo, also alleges Usinas Siderurgicas de Minas Gerais SA, as Usiminas is formally known, overpaid on about 20 billion reais in contracts to companies with ties to Nippon.

“I do think Cade’s decisions are strange,” Rafael Ohmachi, an analyst at Guide Investimentos, said by telephone. “At one point they revoke CSN’s rights, then they go back and give back their rights. It hasn’t been consistent.”

CSN said it doesn’t have influence over the board, maintaining that the two members are independent. Techint-Ternium questions that, pointing to the fact that one of the two directors once did consulting work for CSN.

Paulo Caffarelli, CSN’s chief financial officer, said in an interview last month that his company is not a competitor of Usiminas and that the two steelmakers should work together to confront cheap Chinese imports and slumping demand.

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