The Brazilian Supreme Court STF has sought clarification from the financial markets authority CVM regarding a contentious decade-old corporate acquisition case involving steel giants Ternium and Usiminas. The CVM has officially stated that Ternium's 2011 acquisition of a 27.7% stake in Usiminas did not constitute a change in control, challenging a recent ruling that had favored competitor CSN's claims.
The case centers on the interpretation of Brazilian corporate law regarding minority shareholder rights, specifically the "tag-along" provision. According to CVM's assessment, control changes are legally recognized only when an acquisition involves 50% or more of a company's capital stake. Ternium's purchase of 27.7% of Usiminas falls significantly below this threshold, forming the basis of CVM's position against recognizing it as a control transfer.
The dispute has gained significant financial implications, with CSN pursuing tag-along rights currently valued at approximately $1 billion. CSN's argument rests on the assertion that Ternium effectively gained disguised control of Usiminas through the 2011 transaction, despite acquiring less than a third of the company's shares. This claim has led to a complex legal battle that has wound its way through various levels of Brazil's judicial system.
The legal journey has been marked by multiple setbacks for CSN in lower courts, until a breakthrough occurred at the Superior Court of Justice STJ. In June, the STJ delivered a controversial 3-2 decision in favor of CSN's interpretation, reigniting the debate about the nature of corporate control and minority shareholder protections in Brazilian markets.
Brazilian corporate governance standards, particularly regarding minority shareholder rights, are at the heart of this case. The tag-along provision is designed to protect minority shareholders by ensuring they receive the same price per share as the controlling stake when ownership changes hands. This protection mechanism aims to prevent majority shareholders from extracting premium values while leaving minority shareholders at a disadvantage.
The involvement of Brazil's highest court STF signals the case's significance for the country's corporate law framework. Market analysts are closely monitoring the situation, with many predicting that the STF will likely overturn the STJ's decision, potentially providing relief to Ternium and establishing an important precedent for future corporate acquisitions in Brazil.
The case has broader implications for international investment in Brazil's steel sector, as it touches upon fundamental questions about corporate control definitions and minority shareholder rights. The final resolution could influence how foreign companies approach strategic investments in Brazilian corporations and their interpretation of control acquisition thresholds.
