April 30, 2007 / 8:28 AM / 12 years ago

UPDATE 2-Ternium to take control of Mexico's IMSA

(Adds analysts’ comments, share price)

NEW YORK, April 30 (Reuters) - Ternium SA (TX.N), Latin America’s largest steel company, said on Monday it agreed to take control of Mexico’s Grupo IMSA S.A.B. de C.V. IMSA.MX for about $1.7 billion.

The deal will strengthen Luxembourg-based Ternium’s position in North America and expand its capabilities in value- added steel products in Mexico and the United States.

Ternium is controlled by Argentina’s Techint and groups Argentina’s Siderar SID.BA, Mexico’s Hylsamex, as well as the Venezuelan company Sidor.

Analysts said the purchase would help Ternium consolidate its position and integrate its operations.

“The company’s strategy of reducing Venezuela exposure is appropriate,” Edmo Chagas, an analyst with the UBS investment bank said in a report.

The company has in the past had a tense relationship with the government of Venezuela’s leftist president, Hugo Chavez.

“The strategic positioning post-acquisition justifies the premium paid,” the report added.

In Buenos Aires, Christian Reos, an analyst at the Allaria Ledesma brokerage, said the operation “is positive for Ternium, although the purchase ratios aren’t attractive, neither are they excessive.”

Under the deal, Ternium will also absorb about $1.5 billion in IMSA debt and Reos said Ternium’s cash-flow generation meant it would quickly be able to reduce IMSA’s debts.

One of Mexico’s largest steel makers, IMSA said earlier this month that it held talks with Ternium, as well as other steel companies amid a global consolidation in the industry. It was one of the last Mexican steelmakers in local hands.

Ternium said that, under the terms of the agreement, it or any of its subsidiaries, would make a tender offer for all of the issued and outstanding share capital of IMSA at a price of $6.40 per share.

Concurrently with the completion of the tender offer, IMSA’s majority shareholders, who own about 90.4 percent of the company, will have their shares redeemed in cash at the same price.

At the end of last year, the Canales Clariond family increased their participation in IMSA to about 91 percent by buying a large amount of stock previously owned by their cousins, the Clariond Reyes.

Ternium said the deal is expected to close in the third quarter. The company will finance the transactions mainly through debt, for which it has secured bank commitments.

With additional reporting by Cesar Illiano in Buenos Aires

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