Big Steel Merger Coming Up: Alcoa Inc (AA), Reliance Steel & Aluminum (RS), Metals USA Holdings Corp (MUSA)

Page 1 of 2

Over the past few weeks, the long-anticipated merger between Reliance Steel & Aluminum (NYSE:RS) and Metals USA Holdings Corp (NYSE:MUSA) has taken several important steps forward. First announced in early February, the merger values Metals USA Holdings Corp (NYSE:MUSA) at around $1.2 billion and offers considerable value for the company’s shareholders and employees. From Reliance Steel & Aluminum (NYSE:RS)’s standpoint, it also has the potential to create exciting synergies that may ultimately reduce its operational costs and allow it to increase production in the United States and elsewhere.

Is It The Time to Buy Alcoa (AA)?

As of the second week of March, the “shopping” period during which Metals USA Holdings Corp (NYSE:MUSA) was permitted to solicit alternative takeover bids has passed into oblivion. With the customary regulatory investigation of the deal coming to an early close, there appears to be little standing in the way of the expedient completion of this merger. If all goes according to plan, the deal could be finalized as early as the end of the second quarter of 2013.

About Reliance Steel & Aluminum and Metals USA

Los Angeles-based Reliance Steel & Aluminum is a metal processing company that makes, stores and distributes a staggering array of metal-based products. The company’s most popular materials include various aluminum derivatives, alloys, various steel blends, copper, brass, titanium and specialty metals. It also engages in the production and distribution of simple finished products like pipes, tubes, bolts and bars as well as high-quality tools that it makes “to order” for oil drillers, communications firms, manufacturers and other specialized outfits. Reliance Steel operates in North America, Europe, the Middle East and East Asia. In 2012, the company earned $403.5 million on $8.4 billion in gross revenues.

Fort Lauderdale, Florida-based Metals USA is a metal processing firm that focuses on producing basic mechanical and structural components using steel, aluminum, and other pure metals and alloys. The company’s products include bars, pipes, bolts, plates, angles, tubes and other items. It also engages in a variety of metalworking services, including shearing, splitting, bending, burning and alloy production. Metals USA deals with clients in the aerospace and construction industries as well as outdoor furniture manufacturers and industrial machinery assemblers. The company earned $52.7 million on gross 2012 revenues of about $2 billion.

Competitors

Since Reliance Steel & Aluminum (NYSE:RS) and Metals USA Holdings Corp (NYSE:MUSA) operate in many of the same industries, it is only natural to assume that they have some common competitors. In particular, they face stiff pushback from larger firms like Alcoa Inc (NYSE:AA), as well as smaller, more specialized outfits like Worthington Industries, Inc. (NYSE:WOR).

Of course, Alcoa Inc (NYSE:AA) is far larger than either Reliance Steel & Aluminum (NYSE:RS) or Metals USA. While it produces virtually every basic and finished aluminum product in existence, it does not compete directly with either company’s steel-processing operations. As such, Alcoa Inc (NYSE:AA), Reliance and Metals USA have coexisted peacefully for many years. At the same time, both companies are cognizant of the moves that Alcoa makes due to its ability to influence aluminum prices.  Relative to Reliance and Metals USA Holdings Corp (NYSE:MUSA), Alcoa Inc (NYSE:AA) has a much lover ROA of 1%, versus about 7% for the others.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!