Chavez to nationalize Venezuela's top steelmaker

CARACAS (Reuters) - Venezuela will take control of the country's largest steelmaker in the second major takeover of foreign businesses in a week as President Hugo Chavez resumes his socialist drive to nationalize key industries.

Just days after Chavez announced the takeover of the cement industry, his government said Wednesday that steelmaker Ternium Sidor would fall back into state hands, sending the Argentine-controlled company's shares tumbling.

Chavez increased state control of swathes of the oil-rich economy in a multibillion dollar campaign last year but had spent recent months focusing on day-to-day issues like crime and trash collection after voters rejected his push for wider powers in a December referendum.

Venezuela's Vice President Ramon Carrizalez said parent company Ternium would be compensated for the takeover and could even stay on as a minority partner, but accused it of an arrogant attitude toward employees.

"In this government, the worker comes first," he said.

The leader of the union at the sprawling Ternium Sidor complex about 300 miles southwest of Caracas, said workers were pleased with the decision, made after months of short strikes in a fierce labor dispute with the company.

"We are here celebrating in an assembly the decision that Sidor returns to state hands," leader Nerio Fuentes told Reuters.

Ternium's New York-listed shares fell 9 percent to $35.20. It pleaded with Chavez in a letter to intervene and find a "constructive solution" to the nationalization.

Chavez first threatened to take over the steel firm last year, during the takeover of oil projects and telecom companies.

He renewed his nationalization campaign last Thursday by ordering the takeover of the country's largest cement companies, which are all foreign run. He has also threatened in the past to nationalize banks and food companies.

CHAVEZ'S COMPLAINTS

Criticized by supporters for shortages of low cost housing, Chavez complains the steel and cement industries do not put a high enough priority on supplying the domestic market and he will almost certainly now force them to change.

"The takeovers of both cement and steel industries will be used to breathe new life into construction in Venezuela as well, especially in the form of lower tier housing," Lehman Brothers analyst Gianfranco Bertozzi said in a research report.

Last year's nationalizations targeted U.S. and European companies but the latest wave has also included companies from Latin America.

Carrizalez said he did not expect the steel nationalization to hurt relations with Argentina, a close ally with whom Venezuela shares debt and trade cooperation deals.

Ternium is a New York-listed company with a market capitalization of about $7.7 billion. It is controlled by Argentine conglomerate Techint.

Chavez is a former paratrooper who tried to seize power in a botched coup in 1992. Since winning power at the ballot box in 1998, he has implemented much of his coup-era manifesto to re-nationalize companies privatized by prior governments.

Ternium Sidor was privatized in 1997. It produces about 4.5 million tonnes of liquid steel annually and has 5,600 unionized workers, plus more than 4,000 contract employees.

It has struggled this year with sporadic strikes and growing worker anger at a drawn-out conflict over pay and conditions which turned ugly in March when a union leader was shot and wounded as workers and police clashed.

Ternium's main operations are in Mexico, Venezuela and Argentina. For the fourth quarter of 2007, it reported a net profit of $221 million. Its holdings include steelmakers Siderar <SID.BA> in Argentina and recently acquired Grupo Imsa in Mexico.

The Venezuelan operation is 60 percent controlled by Ternium, with the rest belonging to the state, workers and retirees.

The cement takeovers, where the government wants a majority stake, include the Venezuelan assets of Mexico's Cemex <CX.N>, <CMXCPO.MX>, as well as Switzerland's Holcim <HOLN.VX> and France's Lafarge <LAFP.PA>. (Additional reporting by Brian Ellsworth in Caracas and Fiona Ortiz in Buenos Aires; Writing by Frank Jack Daniel; Editing by Kieran Murray)