Reliance Steel Amends $1.5B Facility, Raises $500M - Analyst Blog

By Zacks Equity Research,

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Reliance Steel & Aluminum Co. ( RS ) said that it has amended and restated its existing $1.5 billion unsecured revolving credit facility and raised new term loan worth $500 million.

The credit agreement, which has a five-year term (expiring Apr 4, 2018), provides Reliance Steel with an option to increase the revolving credit facility by up to $500 million. Both facilities allow prepayments.

The twin transactions represent a significant step in obtaining the necessary funding to complete Reliance Steel's earlier announced buyout of Metals USA Holdings Corp. ( MUSA ).

Reliance Steel, in Feb 2013, entered into an agreement to acquire all outstanding shares of Metals USA for $20.65 per share in cash. Reliance Steel expects to close the acquisition in second-quarter 2013.

Metals USA makes steel and aluminum components and had assets worth $1 billion and sales of $2 billion at the end of 2012. With the acquisition, Reliance Steel will add about 48 service centers, which are strategically located throughout the U.S., to its existing operations.

Metals USA is a strategic fit with Reliance Steel's portfolio and complements its existing customer base, product mix and geographic footprint. The transaction is expected to be accretive to Reliance Steel's earnings immediately upon closing.

Reliance Steel has tremendous earnings capacity with its broad and diversified product base, along with a wide geographic footprint that positions it well in the industry. The company continues to evaluate and execute additional growth projects and is well placed to leverage the strong momentum across a number of end markets.

However, Reliance Steel contends with weak steel and metals pricing environment. We also remain concerned about the non-residential construction market (the company's largest end market), which continues to be the weakest link.

Reliance Steel currently carries a short-term (1 to 3 months) Zacks Rank #3 (Hold).

Other companies in the metals industry having favorable Zacks Rank are Gibraltar Industries Inc. ( ROCK ) and Worthington Industries Inc. ( WOR ). While Gibraltar holds a Zacks Rank #1 (Strong Buy), Worthington retains a Zacks Rank #2 (Buy).

METALS USA HLDG (MUSA): Free Stock Analysis Report

GIBRALTAR INDUS (ROCK): Free Stock Analysis Report

RELIANCE STEEL (RS): Free Stock Analysis Report

WORTHINGTON IND (WOR): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: MUSA , ROCK , RS , WOR

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