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Venezuela begins buying remaining 20 percent stake in steelmaker Sidor

Thursday, 6 Feb 2014 | 2:43 PM ET

CARACAS, Feb 6 (Reuters) - Venezuela on Thursday began buying the remaining 20 percent of shares in steelmaker Sidor from workers and retirees in a $667 million operation that will give the state full ownership of the firm, a source familiar with the situation said.

Late socialist leader Hugo Chavez in 2008 nationalized the firm by taking over the 80 percent stake held by Argentina's Ternium, but its productivity has plummeted since then due to operational problems and chronic labor conflict.

"The share repurchase process has begun," said a high-ranking source in the state metals conglomerate known as CVG, who asked not to be identified.

He said the process would continue until mid-March.

Sidor's minority shareholders, who stopped receiving dividends after the state takeover, will receive 657.5 bolivars per share, or $219.19 at the official exchange rate, the source said.

The company's 2013 output of 1.4 million tonnes of liquid steel was near a 20-year low. Prior to the takeover, Sidor's output was close to its installed capacity of 5 million tonnes per annum.

Labor disputes, lack of investment and outdated installations have left Venezuela's once-thriving metals sector in crisis.

President Nicolas Maduro has vowed to return the sector to full production capacity in the near term.

Foreign partners in the Venezuelan mining industry are seeking to leave the country, including a Japanese consortium that holds a 20 percent stake in state-run aluminum smelter Venalum.

The Japanese consortium includes Showa Denko, Marubeni, Kobe Steel, Sumitomo Chemical , Mitsubishi Materials and Mitsubishi Aluminum.

(Reporting by Diego Ore, writing by Brian Ellsworth; Editing by Diane Craft)