t the end of 2005, the Gerdau Group gained a footing on European soil when it announced its acquisition of 40% of the equity of Corporación Sidenor S.A., Spain’s main specialty long steel producer. Sidenor is also one of the country’s largest manufacturers of forged
and cast products.

The deal, totaling US$ 563.2 million, was in partnership with Santander Bank, which acquired 40% of Sidenor’s share capital, while Sidenor’s Spanish executives retained 20%. The operation was finalized in January 2006 and Corporación Sidenor’s figures were therefore included in the Gerdau Group consolidated financial statements from this date forward, in
proportion to its shareholding.

Sidenor primarily serves the European market, focusing on the automotive industry. It has three steel mills in northern Spain – Reinosa, Basauri and Vitória – and two forging units in Madrid and Elgeta. In Reinosa, the company produces rolling mill cylinders and large specialty cast parts in addition to the specialty long rolled products.

Sidenor also has a 58.44% stake in the Brazilian steel company Aços Villares, which has mills in the towns of Mogi das Cruzes, Pindamonhangaba and Sorocaba. Together, Sidenor’s mills have an annual production capacity of 1.9 million metric tons of steel.

This new situation has allowed the Gerdau Group to advance its growth strategy, primarily in the specialty long steel sector, in overseas markets where the automotive industry is present.