CHICAGO The growth of
service center operator Reliance Steel & Aluminum Co. has
been based largely on acquisitions, and its biggest purchase to
datethat of former rival Metals USA Holding
Corp.creates a company that boasts slightly more than $10
billion in pro forma sales.
In an exclusive interview with
AMM, chairman and chief executive officer David H.
Hannah talked about the steps Reliance will take following the
completion of the $1.24-billion deal and how it differs from
the companys $1.1-billion acquisition of PNA Group
Holding Corp. in mid-2008.
A dozen senior Metals USA
executives have arrived at Reliances headquarters in Los
Angeles for a get-to-know-you dinner and a series of meetings
during which Reliance will gather information that
couldnt be shared during due diligence, including
pricing, and lay out its goals, Hannah said.
How much and how quickly the
executives open up "depends on the personalities," Hannah said,
noting how long the two companies were competitors. "But we
will have a free and open discussion."
The executives will pass any key
takeaways along to their regional and branch managers and
"Our message to employees is to
say we arent there to screw up their lives. The company
is doing well and will be part of our organization. We are not
changing the business or putting our own manager in place,"
Hannah said. "Were not changing what theyre doing.
What they do is good. We think we can help them do better,
Hannah addressed criticisms that
Reliance is not considered a consolidator in the service center
spaceone that rationalizes facilities or divests
assetsexcept in isolated cases. "There is not a lot of
integration," he said. "The reason we dont sell or close
much is we are very detailed and diligent on the front end.
When we buy, we know what were buying, and we wont
buy if we dont like it."
As for how the Metals USA
purchase stacks up against the PNA Group acquisition, its
all in the timing, Hannah said. "There is a lot of difference
despite the size similarity. The PNA timing just was awful," he
said, referring to the global economic crisis immediately
following the close of the acquisition. "But we were capable of
doing that deal because we werent trying to turn around
and sell it.
"There are cyclical and volatile
market conditions. The (metals) market can go flat or down.
Certainly with PNA it went down and more quickly than
imaginable. It was not fun. But PNA is doing better and making
money," he said. "The other thing that hurt bad (when acquiring
PNA Group) was that pricing was cut in half, and (the company
By comparison, "the timing on
the Metals USA transaction is that pricing is not at any peak
level, more bouncing along a floor. So we dont have same
risk (of asset devaluation)."
Another difference is that the
economy is at least partly through a recovery, however slowly
it evolves, and demand for metal products has the "potential
for meaningful improvement" over the next couple of years,