Ternium: Starting to expand
It was only a few weeks ago that Ternium said it would expand its operations in Mexico. Today we hear this.
Ternium S.A. announced today that it has entered into a definitive agreement to acquire a 54% ownership interest in Colombia-based Ferrasa through a capital contribution in the amount of US$74.5 million. Upon completion of this transaction, Ferrasa will have a 100% ownership interest in Sidecaldas, Figuraciones and Perfilamos del Cauca.
Ferrasa is a leading long and flat steel products processor and distributor. Sidecaldas is a scrap-based long steel making and rolling facility, with an annual production capacity of approximately 140,000 tons. Figuraciones and Perfilamos del Cauca manufacture welded steel tubes, profiles and beams. These companies have combined annual sales of approximately 300,000 tons, of which approximately 70% are long products and 30% are flat and tubular products, used mainly in the construction sector.
Through these investments Ternium expects to expand its business and commercial presence in Colombia, a country that is experiencing significant growth and is presently the fifth largest steel consuming market in Latin America, as well as in Central America.
Now these are small acquisitions compared to what we are used to. Although this is a strategic acquisition allowing it to grow in one of the biggest steel markets in Latin America. Also, the importance of this deal is management is now looking to expand. Management must be expecting markets to have rebounded and growing.
I still believe in 2010 we will hear a big acquisition or growth by Ternium. I think their current business is going to make strong cash flow and with the payments from Mr. Chavez, Ternium should have plenty of cash to pay down debt and to look to lever up for further growth.