Usiminas Talks M&A Outlook: BTG

Wilson Brumer, CEO of Brazilian Steelmaker Usiminas, see little room for M&A in the Brazilian steel market, given the profile of controlling shareholders at the major players, according to a report from BTG Pactual. “In his view, Nippon is not a seller of its Usiminas stake, and even if 1 of the 2 other shareholders decide to leave (Votorantim or Camargo), they have tag along rights over one another, and it is unlikely that the structure changes materially,” says BTG. However, the shop adds that Brumer could be interested in M&A with Votorantim long steel (Barra Mansa). BTG notes that Usiminas may look to acquire assets in distribution in Brazil and abroad. The steelmaker is still studying an ADR listing, but no decision has been taken yet. “It would be a positive move for the company, but not enough to justify a reduction in its discount to peers, as the dual share class structure is unlikely to change, and the strategic issues remain,” BTG says. The shop is positive on Usiminas stock for the short term. However, over the long term it sees a need to invest and notes market share and margin loss risk, as well as backdated volume growth in iron ore. It notes a preference for rival Gerdau, which has superior growth prospects, and better market position.