CHICAGO The proposed
merger of Reliance Steel & Aluminum Co. and Metals USA
Holdings Corp. came about after several years of discussions
between Reliance chairman and chief executive officer David H.
Hannah and Metals USA director M. Ali Rashid about service
center industry dynamics.
Once they agreed it was a strong
idea, the price was negotiated upward five times before the
$1.2-billion$20.65 per shareoffer was accepted in
amm.com, Feb. 6), according to background laid out
in the preliminary proxy statement filed by Metals USA.
Over the past few years, Hannah
and Rashid, who is also a senior partner of an affiliate of the
Apollo Fund, which owns approximately 53 percent of Metals
USAs outstanding shares, talked from time to time about
developments in the industries in which both companies
participate "and about Reliances theoretic interest in a
possible strategic transaction."
Those conversations were casual
until Nov. 7, 2012, when Hannah called Rashid to discuss doing
a deal. The first offer was $17.75 per share. Two days later,
Rashid told Hannah the offer was insufficient, and Hannah
raised the offer to $18.50 per share and requested preliminary
Metals USAs board of
directors determined Nov. 11 that the revised proposal still
did not represent sufficient value. Reliance raised the offer
Nov. 14 to $19.10 per share and Metals USAs directors
agreed to share limited due-diligence information because they
were confident that would result in a higher offer, and the two
companies signed a confidentiality agreement Nov. 16.
By Dec. 10, Reliance had raised
its offer to $19.30 per share but Rashid said the board would
probably expect more. After in-depth reviews with its bankers,
Metals USA agreed to furnish to Reliance initial drafts of a
merger agreement that included Reliances condition that
Apollo Funds would vote its shares in favor of the merger and
Metals USAs condition that it have some time to solicit
In mid-January, Rashid told
Hannah "that an additional increase in proposed value would be
necessary before Metals USA would agree to a transaction with
Reliance." On Jan. 17, Hannah raised the offer to $20.50 per
share "but indicated that Rashid should not expect any further
material price increase."
On Jan. 30, members of Metals
USAs and Reliances management teams met, together
with their bankers, for due diligence-related management
presentations. Rashid and Hannah also met separately. Rashid
sought a further share price increase, and Reliance provided a
final bid of $20.65.
By Feb. 6, Metals USAs
advisors judged the agreement as fair and in the best interest
of shareholders. The board has unanimously recommended that
Metals USAs shareholders vote in favor of the proposal to
adopt the merger agreement, according to the proxy