Reliance Steel & Aluminum Co.
) continues its acquisition spree as it has purchased Texas-based
privately-held Sunbelt Steel Texas, LLC to expand its foothold in
the energy space. The terms of the deal were undisclosed.
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Sunbelt, which has annual sales of roughly $48 million, distributes
special alloy steel bar and heavy-wall tubing products to the oil
and gas industry. The entity will operate as a fully-owned unit of
Reliance Steel with its current management remaining in place.
The acquisition has allowed Reliance Steel to serve customers
across a number of oil and gas well drilling categorieps including
vertical, horizontal, directional and deewater drilling
applications. The company hopes to leverage Sunbelt's growing
presence in specialty markets.
Reliance Steel continues its expansion initiatives and strategic
acquisitions to spur growth. The acquisitions of McKey and National
Specialty Alloys ("NSA"), in February and April 2012, respectively,
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. More recently, the company snapped up
Alabama-based steel processor, GH Metal Solutions.
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 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.
Reliance Steel currently retains a short-term Zacks #4 Rank (Sell).
We have a long-term Neutral recommendation on the stock.