A change of chief executive at Brazilian steelmaker Usiminas has accelerated plans for controlling shareholders Nippon Steel & Sumitomo Metal Corp and Ternium SA to break up the company, a source close to the Japanese firm said on Tuesday.

Nippon Steel, however, issued a statement later denying that it was planning to break up Usiminas, and a spokesman said the focus was on financial restructuring and completing an equity financing.

The Usiminas board last week appointed veteran executive Sergio Leite to the top job in a contested vote. He replaced Rômel Erwin de Souza, who had been backed by Nippon Steel.

In a split, Nippon Steel could take Usiminas' mill in Ipatinga, while Ternium could get the Cubatao mill in the neighboring state of Sao Paulo. The source said no official negotiations had begun.

The companies have been at loggerheads for nearly two years over control of the Brazilian steelmaker and a break-up has been considered by both sides.

Usiminas has already stopped steel production at its Cubatao mill, slowed work at its mines and laid off thousands of employees as it suffers through Brazil's worst recession in decades.

"(Nippon) does not see another solution other than a division of the company," the source said.

Japan's Nikkei newspaper also reported on Wednesday that Nippon Steel intended to hold talks on dividing production assets of Usiminas with Ternium.

Nippon Steel in Tokyo said that there was no truth to reports it was planning to break up Usiminas.

"The priority issues on Usiminas now are to complete a planned equity finance and financial restructuring," a spokesman for the company said.

Ternium and Usiminas declined to comment.

Japan's largest steelmaker is looking to annul the appointment of Leite, arguing it was made without the required consent of its members on the Usiminas board. Nippon Steel has taken the case to a court in the state of Minas Gerais, where Usiminas is based.

Shares in Nippon Steel were down 3.4 percent as of 0208 GMT in Tokyo, underperforming the TOPIX index, which was down 0.6 percent.

 

Source : reuters.com

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