Brazilian Court Confirms Tenaris’s Obligation to Pay Indemnification in Usiminas Deal; Decision Subject to Further Appeals
On December 6, 2024, Tenaris S.A., a leading global supplier of steel tubes and related services, announced a significant legal development in its ongoing dispute with Companhia Siderúrgica Nacional over its 2012 acquisition of a stake in Usiminas. The Brazilian Superior Court of Justice made a unanimous decision rejecting a motion filed by Tenaris's subsidiary Confab and the subsidiaries of Ternium, including Ternium Investments and Ternium Argentina, which sought to reverse a previous decision issued on June 18, 2024. This earlier ruling had mandated the T/T Group to pay indemnification to CSN in connection with the acquisition.
Key Court Ruling
While Tenaris's motion to clarify and revert the ruling was rejected, the SCJ made modifications to the monetary adjustment mechanism. The court decided to cap the attorney’s fees and adjusted the amount that the T/T Group may ultimately be required to pay. Based on the revised calculation, the indemnification amount payable by Tenaris’s subsidiary Confab could be around BRL 548 million (approximately $90 million). This revised sum includes a monetary adjustment through November 30, 2024, and a reduction in attorney’s fees to BRL 5 million.
Tenaris's Defense and Appeal
Despite the court's ruling, Tenaris strongly believes that CSN’s claims are without merit and unsupported. The company has consistently argued that, under the terms of the Usiminas acquisition, there was no requirement for the T/T Group to launch a tender offer or pay indemnification to CSN. As a result, Confab intends to continue defending its position and will seek all available legal avenues, including filing motions and appeals, to contest the decision.
This legal matter stems from the 2012 acquisition of a stake in Usiminas, one of Brazil's largest steel producers, by Tenaris and its partners. CSN, which holds a significant stake in Usiminas, has alleged that the acquisition triggered certain obligations that Tenaris and its partners failed to meet, including the payment of indemnification.
Financial Implications
The ruling, while reducing the overall indemnification amount, still places a substantial financial burden on Tenaris. However, Tenaris has emphasized that it intends to continue challenging the claims, as it believes that it was not obligated to make such payments in the first place. With a final indemnification amount of BRL 548 million (roughly $90 million), Tenaris faces considerable exposure, but it maintains that it will pursue all legal options to avoid a payout.
Company Profile and Legal Strategy
Tenaris, with its global presence, is recognized for its production of steel tubes and related services for the energy industry and other industrial sectors. This ongoing legal battle highlights the complex and often contentious nature of large-scale acquisitions and the legal challenges that can arise from them.
The decision is not final, and Tenaris continues to assert that CSN’s claims are without basis. As the case moves through the appeals process, further developments will likely follow, and the outcome will have significant implications for both Tenaris and the broader steel industry.
