Brazilian Court Confirms Tenaris’s Obligation to Pay Indemnification in connection with its 2012 Acquisition of a Participation in Usiminas; the Decision is subject to Further Appeals

Rhea-AI Summary

Tenaris announced that the Brazilian Superior Court of Justice (SCJ) rejected a motion filed by its subsidiary Confab and Ternium's subsidiaries regarding a June 18, 2024 decision. The court ordered the T/T Group to pay an indemnification to Companhia Siderúrgica Nacional (CSN) related to their 2012 Usiminas participation acquisition.

The SCJ modified the monetary adjustment mechanism and capped attorney's fees, reducing the potential payment. As of November 30, 2024, Confab's revised potential payment would be approximately BRL548 million ($90 million). Tenaris maintains that CSN's claims are unsupported and plans to continue appealing the decision.

Positive

• SCJ's modification of monetary adjustment mechanism reduced the potential payment amount
• Attorney's fees were capped, further lowering the total potential liability

Negative

• Court confirmed obligation to pay approximately $90 million in indemnification
• Legal defeat as motion to reverse previous court decision was rejected
• Ongoing legal uncertainty due to pending appeals

Insights

Legal Expert

The Brazilian Superior Court of Justice's ruling represents a significant legal setback for Tenaris, though with some mitigating factors. The court's decision to modify the monetary adjustment mechanism and cap attorney fees has reduced the potential liability from what could have been a larger amount. The $90 million potential payout, while substantial, is manageable given Tenaris's size and financial position.

The legal dispute stems from a complex 2012 acquisition structure and centers on whether a mandatory tender offer was required. The unanimous rejection of the clarification motion suggests prospects for immediate legal relief, though further appeals remain possible. The case highlights the ongoing risks of cross-border M&A transactions and the importance of careful consideration of local securities regulations.

Financial Analyst

The financial impact of this ruling warrants attention but isn't severe enough to significantly impact Tenaris's overall financial health. With a market cap of $20.9 billion, the potential $90 million liability represents less than 0.5% of the company's value. The company's decision to continue pursuing legal remedies suggests confidence in their position and could potentially lead to further reductions in the final payment amount.

However, investors should monitor this situation as it could impact quarterly results and potentially affect dividend policies or capital allocation decisions in the short term. The case also raises questions about potential similar claims in future M&A activities, which could affect strategic expansion plans in Brazil.

LUXEMBOURG, Dec. 06, 2024 (GLOBE NEWSWIRE) -- Tenaris S.A. (NYSE and Mexico: TS and EXM Italy: TEN) announced that the Brazilian Superior Court of Justice (SCJ) published today its unanimous decision to reject a motion of clarification filed by Tenaris’s subsidiary Confab, together with Ternium’s subsidiaries Ternium Investments and Ternium Argentina (all of which compose the T/T Group under the Usiminas shareholders agreement), that had sought to revert the June 18, 2024 SCJ decision ordering the T/T Group to pay Companhia Siderúrgica Nacional, or CSN, an indemnification in connection with their 2012 acquisition of a participation in Usiminas.

Notwithstanding the foregoing, the SCJ unanimously resolved to modify the applicable monetary adjustment mechanism and to cap the applicable attorney’s fees, thereby lowering the aggregate amount that would be payable by the T/T Group if CSN ultimately prevails in its claims. Assuming monetary adjustment through November 30, 2024, and BRL 5 million in attorney’s fees, in each case as determined pursuant to the SCJ decision published today, the revised aggregate amount potentially payable by Confab would be of approximately BRL548 million (approximately $90 million).

Tenaris continues to believe that all of CSN's claims and allegations are unsupported and without merit, and that in connection with the Usiminas acquisition the T/T Group was not required either to launch a tender offer or to pay indemnification to CSN. Accordingly, Confab intends to continue to defend its rights vigorously and to file all available motions and appeals against the SCJ decisions that ordered an indemnification payment.

Some of the statements contained in this press release are “forward-looking statements”. Forward-looking statements are based on management’s current views and assumptions and involve known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied by those statements. These risks include but are not limited to risks arising from uncertainties as to future oil and gas prices and their impact on investment programs by oil and gas companies.

Tenaris is a leading global supplier of steel tubes and related services for the world’s energy industry and certain other industrial applications.

Giovanni Sardagna        
Tenaris
1-888-300-5432
www.tenaris.com

FAQ

What is the amount Tenaris (TS) might have to pay in the Brazilian court case?

Tenaris's subsidiary Confab might have to pay approximately BRL548 million (about $90 million), including monetary adjustments through November 30, 2024, and BRL 5 million in attorney's fees.

Why is Tenaris (TS) facing an indemnification payment in Brazil?

The indemnification payment is related to Tenaris's 2012 acquisition of a participation in Usiminas, following a court decision in favor of Companhia Siderúrgica Nacional (CSN).

What was the Brazilian Superior Court of Justice's decision regarding Tenaris (TS) in December 2024?

The court rejected Tenaris's motion to reverse the June 18, 2024 decision ordering indemnification payment, but modified the monetary adjustment mechanism and capped attorney's fees, reducing the total potential payment.