Gotta agree it would make sense to get out fully -- would also send a message to Hugo.

Analyst: Ternium would be smart to hand over 100% of Sidor - Venezuela

Thursday, April 10, 2008

As the Venezuelan government has announced it will nationalize local steelmaker Sidor, "it doesn't make sense for Ternium to have a minority share there," a sector analyst told BNamericas.

"It they are going to nationalize it, it would be smarter to hand over the whole thing. Because what good is a minority share in a company that you don't control, that has no secondary market if you wanted to sell it?" said Cristián Reos from Argentine brokerage Allaria Ledesma.

Sidor is 59.7% controlled by the Ternium (NYSE: TX) steel group.

He added that if Ternium keeps a 5-10% share in exchange for being able to purchase cheaper steel, it could be positive, "but if it keeps 20-30% of the company, the problem will persist."

The Venezuelan government said a committee has already been formed to determine how much will be owed to the company and said it is open to negotiation, which could include buying shares.

INDEMNITY

Reos also believes that no matter how much Ternium is paid, the government "is never going to pay the same amount that a steel plant anywhere else in the world would cost in order for Ternium to take that money and purchase another steel company."

Local press reported that Ternium valued at roughly US$2.4bn its Sidor operations in Venezuela, where the state also holds 20.4% through heavy industry holding company CVG and employees hold the remaining 19.9%.

Due to the collapse of collective contract negotiations between the company and the union Sutiss, which were drawn out over 15 months, employees have organized nine strikes so far this year, prompting the government's decision.

Each stoppage meant losses of roughly US$7mn daily. The company has liquid steel capacity of 4.2Mt/y.

Harvey Beltrán
Business News Americas