Reliance Steel & Aluminum Co. is on a buying spree. The Los Angeles-based metals service center completed three acquisitions in less than one month in 2006 -- the largest being the purchase of Earle M. Jorgensen Co. With the acquisitions, Reliance -- one of IndustryWeek's IW 50 Best Manufacturers for 2006 -- will expand its U.S. and global presence.
The company closed the Jorgensen deal in April at a purchase price of $13 per share with a total value of approximately $984 million. The Jorgensen acquisition will add 39 facilities to Reliance's North American operations. It will also add Jorgensen's bar, tubing, plate and other metal products to its line of processed metals.
"We will significantly increase our geographic, product and customer diversification by combining with an industry peer that complements our reputation for excellence and our corporate culture," said Reliance CEO David Hannah in a January statement.
In March, Reliance's subsidiary Precision Strip Inc. finalized a deal to acquire privately held Flat Rock, Mich.-based Flat Rock Metal Processing LLC. Flat Rock is known as a "toll" company because it processes metal for a fee without taking ownership of it. Flat Rock has facilities in Perrysburg, Ohio, and Eldridge, Iowa.
At A Glance
Reliance Steel & Aluminum Co.
Los Angeles, CA
Primary Industry: Metals
Number of employees: 5,000
2005 In Review
Revenue: $3.4 billion
Profit Margin: 6.09%
Sales Turnover: 1.91
Inventory Turnover: 6.64
Revenue Growth: 14.37%
Return On Assets: 13.14%
Return On Equity: 24.98%
The company also is expanding its business in China with the purchase of Everest Metals Co. Ltd., a metals service center company based near Shanghai, China.
The acquisition was made through Reliance Pan Pacific Pte. Ltd., a joint venture company that is 70% owned by Reliance and 30% owned by Singapore-based Manufacturing Network Pte. Ltd.
"This is a good opportunity for us to expand into a fast-growing region of the world and at the same time continue to serve our existing customers that have established businesses in China," said Hannah in a March 2 press release.
The buyouts are part of a battle between large service centers to increase their market share and lower materials costs, reports Investors Business Daily in a May 30 article. Reliance has made 35 acquisitions since it went public in 1994, according to the publication.
Indeed, Reliance is growing. Company profits increased 55% to $71.9 million, or $2.14 per share over the year-ago period. Sales rose 22% to a first-quarter record of $988 million. Hannah attributes the solid quarter to strong customer demand, which pushed metals sales volumes up 27%.
The company doesn't expect any "significant changes in demand or price" in the second quarter and earnings per share of $2.25 to $2.35. In an April 20 statement, Hannah cited the importance of the Jorgensen deal and other acquisitions toward future growth.
"We are optimistic regarding the current operating environment and the favorable impact of our recent acquisitions, especially the Earle M. Jorgensen Co.," said Hannah. "We look forward to the opportunity to continue to execute our strategies for future growth and success."
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