Business Context and Reporting Period
This Form 6-K filing by Ternium S.A. is dated March 30, 2023. The report discloses a strategic corporate action rather than periodic financial results. Ternium, Latin America's leading flat steel producer, announced a transaction to increase its participation in the Usiminas control group and establish a new governance structure for Usinas Siderúrgicas de Minas Gerais S.A. (Usiminas).
Key Financial Metrics and Transaction Details
- Transaction Value: Ternium will pay approximately $111.0 million in cash.
- Acquisition Scope: Purchase of 57.7 million ordinary shares of Usiminas.
- Share Price: BRL10 per ordinary share.
- Resulting Ownership: Ternium's participation in the Usiminas control group will increase to 51.5%.
- Financing: The transaction will be financed with cash on hand.
- Control Group Composition: Post-transaction, the T/T group (Ternium and affiliates) will hold 61.3% of the control group, while the NSC group (Nippon Steel, Mitsubishi, MetalOne) will hold 31.7%.
Material Changes and Governance Structure
The filing details a significant shift in the governance of Usiminas. Upon closing, the T/T group will nominate a majority of the Usiminas board of directors, the CEO, and four other board of officers members. Ordinary decisions will require a 55% majority of control group shares for approval. The transaction is subject to approval by Brazil's antitrust authorities.
Outlook, Risks, and Contingencies
Future Options:
- Call Option: After the second anniversary of closing, the T/T group has the right to buy the NSC group's remaining interest (153.1 million shares) at the higher of BRL10 per share or the 40-trading day average price.
- Put Option: The NSC group may withdraw its remaining shares at any time after closing to sell in the open market, subject to a right of first refusal by the T/T group. After the second anniversary, they may also sell to the T/T group at BRL10 per share.
Risks: Management notes that forward-looking statements involve risks including uncertainties regarding GDP, market demand, global production capacity, tariffs, and industry cyclicality. The transaction is contingent on regulatory approval.
Investor Verification Checklist
- Verify the status of antitrust approval from Brazilian authorities.
- Confirm the exact closing date of the transaction to determine the start of the two-year option period.
- Monitor Ternium's cash position to ensure the $111.0 million payment does not impact liquidity for other operations.
- Review the composition of the newly nominated Usiminas board of directors and CEO.
- Track the market price of Usiminas shares relative to the BRL10 strike price for future option exercises.