CHICAGO In a surprise
move, Reliance Steel & Aluminum Co. and Metals USA Holdings
Corp. have agreed to merge in a roughly $1.2-billion deal.
It is Reliances largest
acquisition to date, and will give the Los Angeles-based
distributor a 6- to 7-percent share of the U.S. service center
market, chairman and chief executive officer David H. Hannah
told investors during a Feb. 6 conference call.
transactionwhich has Reliance purchasing Metals USA
shares at $20.65 eachis expected to close in the second
quarter, at which point Reliance will hold total assets
exceeding $6.5 billion with annual sales above $10 billion.
Each companys board of directors has already approved the
Hannah will continue to lead the
combined company, which will retain the Metals USA brand, while
Metals USA chairman, president and chief executive officer
Lourenco Goncalves will retire.
"Reliance is the benchmark of
the industry, the biggest company," Goncalves told
AMM. "Metals USA will be a great fit within their
organization. For me, its rewarding that we built this
company out of zero. We purchased it out of bankruptcy and
built it to $2 billion (in revenue)."
The transaction is a "good value
for stockholders" and good for Metals USA employees, Goncalves
said. "Reliance has a history of treating employees well."
The acquisition of Fort
Lauderdale, Fla.-based Metals USA, which operates 48 service
centers in the United States, will be "an excellent fit and
nicely complements our customer base, product mix and
geographic footprint," Hannah said during the conference
The parties kept the deal well
"I didnt see that coming
at all," Marmon/Keystone Corp. president Norman E. Gottschalk
Jr. said. "The areas they (Metals USA) play
infabrication, constructionthats coming back,
albeit slowly, so the timing is excellent. Reliance is a good
company and (the merger) will stabilize the industry a little
bit more. It gives them further critical mass. Its
another good move on Reliances part.
"I dont see any
negatives," Gottschalk added. "Its a hell of a deal."
"Its a great acquisition
for Reliance and good for Metals USAs shareholders. It
creates quite a powerhouse in the United States," James P.
Bouchard, chairman and chief executive officer of Sewickley,
Pa.-based Esmark Inc., told AMM. "You will have to see
larger competitors step up, as the industry is still
Michael D. Siegal, chairman and
chief executive officer of Bedford Heights, Ohio-based Olympic
Steel Inc., said the market is responding positively to the
merger. "I think its a great deal for both companies," he
said. Generally, "its a pretty good environment for
things to get done. The financing markets are wide open. The
debt markets are open. To be able to finance deals, there are
Siegal said the purchase gives
Reliance critical mass, but "from a competitive standpoint, if
you provide service and value, a bigger competitor in your
region should not matter."
The acquisition will immediately
add to Reliances profits, according to Hannah, even
without evaluating any potential synergies between the two
Adding Metals USA will increase
Reliances sales exposure to the carbon flat-rolled
market, Hannah said. "We feel good about it." Metals USA has "a
good flat-rolled business with solid margins. We looked into
that, and we think its a good business going
He does not expect Reliance will
need to rationalize any of Metals USAs facilities or sell
off any of its assets.