Brazilian Court Confirms Ternium'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

Ternium S.A. (NYSE:TX) faces a legal setback as the Brazilian Superior Court of Justice (SCJ) rejected a motion filed by Ternium subsidiaries and Tenaris's Confab to reverse a June 2024 decision. The court ordered the T/T Group to pay indemnification to Companhia Siderúrgica Nacional (CSN) regarding their 2012 Usiminas acquisition.

The SCJ modified the monetary adjustment mechanism and capped attorney's fees, reducing the potential payment. Ternium Investments could face approximately BRL1.9 billion ($307 million) in payments, while Ternium Argentina could owe BRL0.7 billion ($109 million). Ternium maintains that CSN's claims are meritless and plans to pursue further appeals.

Positive

• Court's modification of monetary adjustment mechanism reduced the potential payment amount
• Company maintains legal options to appeal the decision

Negative

• Potential liability of $416 million combined for Ternium subsidiaries
• Legal setback with rejection of motion to reverse previous court decision
• Ongoing legal uncertainty affecting company operations

Insights

Legal Expert

The Brazilian Superior Court's ruling against Ternium represents a significant legal setback with substantial financial implications. The court's decision to uphold the indemnification requirement while modifying the monetary adjustment mechanism affects Ternium's subsidiaries to the tune of $416 million combined. The case stems from a complex 2012 acquisition dispute with CSN regarding Usiminas shares. While the court's unanimous rejection of the clarification motion strengthens CSN's position, Ternium's commitment to pursue further appeals suggests a protracted legal battle ahead. The capping of attorney's fees provides minor relief, but the core financial obligation remains substantial. The ruling's immediate impact on Ternium's financial position is concerning, though the company's strong stance on the merits of their case and intention to appeal indicates this legal saga is far from concluded.

Financial Analyst

This court decision poses significant financial implications for Ternium. The potential liability of $416 million represents approximately 6.7% of Ternium's market capitalization, making it a material financial obligation. The breakdown of $307 million for Ternium Investments and $109 million for Ternium Argentina could impact the company's liquidity and balance sheet strength. While the modification of the monetary adjustment mechanism and capped attorney fees offer some relief, the core financial burden remains substantial. The ongoing legal uncertainty and potential cash outflow could pressure the company's financial planning and investor confidence. The market will likely factor this contingent liability into Ternium's valuation, potentially affecting stock performance until final resolution through appeals.

LUXEMBOURG / ACCESSWIRE / December 6, 2024 / Ternium S.A. (NYSE:TX) announced that the Brazilian Superior Court of Justice (SCJ) published today its unanimous decision to reject a motion of clarification filed by Ternium's subsidiaries Ternium Investments and Ternium Argentina, together with Tenaris's subsidiary Confab (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 BRL5 million in attorney's fees, in each case as determined pursuant to the SCJ decision published today, the revised aggregate amount potentially payable by Ternium Investments and Ternium Argentina would be of approximately BRL1.9 billion (approximately $307 million) and BRL0.7 billion (approximately $109 million), respectively.

Ternium 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, Ternium Investments and Ternium Argentina intend to continue to defend their rights vigorously and to file all available motions and appeals against the SCJ decisions that ordered an indemnification payment.

Forward Looking Statements

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 gross domestic product, related market demand, global production capacity, tariffs, cyclicality in the industries that purchase steel products and other factors beyond Ternium's control.

About Ternium

Ternium is a leading steel producer in the Americas, providing advanced steel products to a wide range of manufacturing industries and the construction sector. We invest in low carbon emissions steelmaking technologies to support the energy transition and the mobility of the future. We also support the development of our communities, especially through educational programs in Latin America. More information about Ternium is available at www.ternium.com.

CONTACT:

Sebastián Martí
Ternium - Investor Relations
+1 (866) 890 0443
+54 (11) 4018 8389
www.ternium.com

SOURCE: Ternium S.A.

View the original press release on accesswire.com

FAQ

What is the total potential indemnification amount Ternium (TX) might have to pay in the Usiminas case?

The total potential indemnification amount is approximately $416 million, with Ternium Investments potentially owing $307 million and Ternium Argentina owing $109 million.

When did the Brazilian Superior Court of Justice reject Ternium's (TX) motion in the Usiminas case?

The Brazilian Superior Court of Justice published its unanimous decision to reject Ternium's motion on December 6, 2024.

What was the original acquisition year that led to Ternium's (TX) current legal dispute?

The legal dispute stems from Ternium's 2012 acquisition of a participation in Usiminas.