Ternium (TX) eying a controlling stake in Usiminas? We are skeptical about this potential transaction The topic of M&A in the Brazilian steel industry is hitting the headlines, once again... Today, during trading hours, an article (Ternium Bids for 26% Usiminas Stake, Exame Reports - Bloomberg - 16/11/2011) unveiled the possibility of Ternium buying a 26% (voting) stake in Usiminas from Votorantim and Camargo (VOT/CAM), who reportedly have been looking to sell out of the company. To be clear, there is no official press release from the companies on the article, and this is not the first time we have heard this in the press. All in, we consider such a price tag (R$40/shr) for Usiminas shares to be very expensive (25x 2012 EV/EBITDA) and see limited strategic benefits for the companies in a potential deal. On the basis of several arguments, we remain highly skeptical about a deal between TX and Usiminas, and do not recommend that investors build positions on the back of such news.
After reading the analysis, statement although I beleive it price should be trading fundamentally much higher, I might start unloading my shares and swiching them to SID to arbitrage the operation if it happens and to get a good yield.