Brazil's Usiminas: No Decision On Usimec, Automotiva Sales
March 14 2012 - 12:47PM
Dow Jones News
Brazilian steelmaker Usinas Siderurgicas de Minas Gerais SA
(USIM5.BR), or Usiminas, said Wednesday it has considered options
for development of its capital-goods and automotive-parts units but
no decision has been made on possible sales.
No decision is expected soon on new strategies regarding
Usiminas Mecanica, or Usimec--the steelmaker's engineering,
construction and capital goods arm--and Automotiva Usiminas--a
subsidiary that produces parts for the vehicle industry, according
to a Usiminas press spokesman.
In February 2011, Usiminas's former chief executive officer,
Wilson Brumer, told analysts the company may place Usimec in an
initial public offering or seek a strategic partner to provide
technological support. The idea was that Usimec could be used to
add value to Usiminas's assets, the former executive said.
O Estado de S.Paulo newspaper said Wednesday that, with Latin
American steelmaker Ternium SA's (TX) recent purchase of a voting
stake in Usiminas and assumption of some management duties, sales
of the two subsidiaries may now occur.
The units together are worth around 2.5 billion Brazilian reais
($1.37 billion), the newspaper said, citing sources close to
Usiminas. The cash raised from a sale may be essential for Usiminas
to finance its planned expansion of its iron ore mining operations
to a capacity of 29 million tons a year by 2015, from the current 8
million tons, according to Estado.
Estado's estimated price tags of around BRL2 billion for
Usiminas Mecanica and BRL500 million for Automotiva Usiminas are
too high, Barclays Capital said in a note to clients Wednesday. The
figure is "a bit stretched," according to Barclays analyst Leonardo
Correa, who considers BRL1.4 billion a more suitable asking price
for Usimec.
Barclays, however, doesn't expect news on this in the near term
as Ternium's recent entry into Usiminas management may lead to a
new search for growth potential and synergies in these areas, it
says.
A Sao Paulo-based analyst, who declined to be named, said that
"Ternium will make changes at Usiminas, but it won't have any
impact in the short term. However, Usiminas could divest from its
noncore businesses, such as Usiminas Mecanica and the [steel]
distribution business."
Usimec had net sales of BRL1.4 billion in 2011, 11.8% of
Usiminas's total sales. It's active in the basic infrastructure
area, which is an investment focus for the Brazilian government as
the country prepares to host the World Cup in 2014 and Olympic
Games in 2016.
Automotiva Usiminas had sales of BRL343.9 million in 2011, 2.9%
of Usiminas's total sales.
Ternium's parent, Techint Group, finalized acquisition of a 29%
stake in Usiminas's voting stock in January for $2.8 billion.
Ex-Ternium executive Julian Eguren replaced Brumer as Usiminas's
CEO, and is one of three Ternium executives to sit on the
management board of the company, based in Minas Gerais state.
Usiminas is now undertaking "a new analysis of investment plans
and capital expenditure" to seek synergies, improve its operations
and cut costs, Eguren told analysts last week.
Usiminas's preferred shares surged 3.38% to BRL13.15 in early
afternoon trading in Sao Paulo, compared with an overall 0.35%
decline on the Bovespa exchange.
-By Diana Kinch, Dow Jones Newswires, Tel: +55 21 2586 6086,
diana.kinch@dowjones.com
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