Brazilian steelmaker’s management standoff ends

Luxembourg-based Ternium S.A. has announced its subsidiary Ternium Investments S.à.r.l. has entered into a binding agreement with Japan-based Nippon Steel & Sumitomo Metal Corp. (NSSMC) regarding the governance of jointly owned Usinas Siderúrgicas de Minas Gerais S.A. (Usiminas), a steelmaking firm based in Brazil.

The new governance rules for Usiminas include an alternating system for the nomination of the Usiminas CEO and board chair and a new mechanism for the nomination of other members of Usiminas’ executive board.

The right to nominate the CEO and the board chair will alternate between Ternium and NSSMC every four years (consisting of two consecutive two-year terms). For the initial four years, Ternium will be entitled to nominate the CEO and NSSMC will be entitled to nominate the board chair.

Initially, Ternium and NSSMC intend to nominate Sergio Leite as Usiminas’ CEO and Ruy Hirschheimer as Usiminas’ chairman of the board, respectively. The executive board will consist of six members, including the CEO and five vice presidents, with Ternium and NSSMC nominating three members each.

The agreement also includes an exit mechanism consisting of a buy-and-sell procedure, exercisable at any time during the term of the existing Usiminas shareholders' agreement starting four-and-a-half-years after the May 2018 board election. The procedure would allow either Ternium or NSSMC to purchase all or a majority of the Usiminas shares held by the other party.

As part of this agreement, Ternium and NSSMC have stated they “will take all necessary steps to amicably terminate or resolve all pending judicial and administrative disputes involving Ternium, NSSMC, their affiliates or Usiminas, as well as current and former members of Usiminas’ managerial bodies, that have arisen in the past few years in connection with Usiminas, with a view to rebuilding their mutual trust and strengthening their joint partnership in Usiminas.”

According to an online article by Nikkei Asian Review, the feud began in September 2014, “when Nippon Steel, citing compliance violations, led the removal of then-Usiminas CEO Julian Eguren, a Ternium alum.”

A press release issued jointly by Ternium and NSSMC states, “Usiminas has been steadily improving its profitability and financial strength, as shown in recent financial statements, after overcoming certain financial difficulties by actively implementing various measures, including the optimization of its production structure, a capital increase and a debt restructuring. Ternium, together with NSSMC, is committed to moving forward with the turnaround of Usiminas and the enhancement of its competitiveness and corporate value in the best interest of Usiminas and all of its stakeholders.”