Reliance Steel & Aluminum Co. RS has agreed to buy St. Louis, MO-based Tubular Steel, Inc. The terms of the deal were not divulged.
Tubular Steel processes and distributes carbon, alloy and stainless steel pipe, tubing and bar products. The entity, which had net sales were around $200 million in 2014, provides nationwide coverage to its customers from its eight locations across the U.S.
The transaction, which is subject to regulatory clearances and customary closing conditions, is expected to complete in early next year. The acquisition will expand Reliance Steel's product range and supports its customer diversification strategy.
Reliance Steel continues its aggressive acquisition strategy to incite growth. The acquisition of steel and aluminum components maker Metals USA is a strategic fit for the company’s portfolio and complements its existing customer base, product mix and geographic footprint.
Moreover, the acquisition of Aluminium Services UK Limited has allowed Reliance Steel to expand its presence in the aerospace market. The purchase of Fox Metals and Alloys has also strengthened the company's foothold in the oil and gas space.
Reliance Steel’s profit for third-quarter 2015 tumbled year over year, hurt by lower metals pricing. Adjusted earnings for the quarter topped the Zacks Consensus Estimate while sales missed expectations. The company saw pricing pressure due to high levels of metal imports in the quarter.
Reliance Steel is well placed to leverage the strong momentum across a number of end markets, including aerospace. The company’s broad and diversified product base along with a wide geographic footprint position it well in the industry.
However, Reliance Steel continues to be challenged by weak steel industry fundamentals and soft steel and metals pricing. The U.S. steel industry has been hit hard by higher imports of cheaper steel products. Downward pressure on steel prices is expected to continue through the balance of 2015 due to high levels of imports.
Reliance Steel currently holds a Zacks Rank #3 (Hold).
Better-ranked companies in the steel and metals space include Lawson Products Inc. LAWS, Worthington Industries, Inc. WOR and NSK Ltd. NPSKY. While Lawson sports a Zacks Rank #1 (Strong Buy), both Worthington and NSK retain a Zacks Rank #2 (Buy).
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