Reliance Steel & Aluminum Co.
) has agreed to buy Alabama-based steel processor, GH Metal
Solutions, Inc. Under the pact, the company's fully-owned
subsidiary, Feralloy Corporation, will acquire all of the
outstanding shares of GH Metal Solutions, erstwhile known as Gas
RELIANCE STEEL (RS): Free Stock Analysis Report
WORTHINGTON IND (WOR): Free Stock Analysis
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The transaction, which is subject to customary closing conditions,
is expected to be finalized within 30 days. The terms of the deal
GH Metal Solutions, which has annual sales of roughly $44 million,
processes and fabricates carbon steel products. Its processing
equipment includes flat-bed lasers, tube lasers, torches, shears,
automatic band saws, and robotic and manual welders.
Reliance Steel continues its expansion initiatives and strategic
acquisitions to incite growth. The acquisitions of McKey and
National Specialty Alloys ("NSA") have enabled the company to
improve its product offerings and expand into newer markets.
Moreover, the acquisition of all the assets of the Worthington
Steel Vonore plant from
Worthington Industries Inc.
), in April 2012, has reinforced its foothold in the Southeastern
regions of the U.S. In addition, the purchase of the assets of
Airport Metals, in July 2012, marked Reliance Steel's first foray
into the Australian market.
These moves are in sync with Reliance's philosophy of growing
inorganically. The strategic acquisitions are expected to drive
growth moving forward through improved product offerings and
expansion into new markets.
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, we are concerned about the non-residential construction
market (the company's largest end market), which continues to be
the weakest link. In addition, raw material prices are expected to
Reliance Steel currently holds a short-term Zacks #4 Rank (Sell).
We have a long-term Neutral recommendation on the stock.