Steel and Metal Service Center M&A Industry Update
The Metals market saw M&A accelerate up and down the value chain during 2021 and the first half of 2022 with more deal activity on the horizon. Headline risks such as COVID-induced supply chain disruption, import tariffs, and geopolitical tensions are not dampening a dynamic market which has seen metals price volatility reach record highs.
Steel and metal service centers were active with value-added processing in focus as capability and margin expansion remain priorities. These centers are looking to acquire companies with more value-added processing to increase margin and help offset volatility in steel and other metals’ cost. “Historically service center margins did not include the cost of metal because volatility wasn’t significant. Now service centers are not compensated for the increased risk,” said BGL’s Vincent J. Pappalardo, Managing Director in BGL’s Metals & Advanced Metals Manufacturing Group.
Ryerson (NYSE:RYI) announced it acquired Apogee Steel Fabrication in March 2022. The Mississauga, Ontario-based sheet metal fabricator serves customers in Canada and the U.S. Apogee provides complex fabrication assemblies in stainless steel, aluminum, and carbon sheet, said Ryerson in the transaction announcement. Its comprehensive offering of fabrication services includes shearing, punching, forming, and laser-cut processing in addition to welding and hardware assembly services. Mike Burbach, COO of Ryerson, commented, “We see Apogee strengthening Ryerson’s network of value-added service centers in Canada, adding to our processing capabilities, and growing our full-service fabrication business.”
Reliance Steel & Aluminum (NYSE:RS) acquired Nu-Tech Precision Metals in December 2021. Nu-Tech is a custom manufacturer of specialty extruded metals, fabricated parts, and welded components for diverse markets including nuclear, aerospace, and military, among others. Jim Hoffman, CEO of Reliance, commented on the acquisition, “Nu-Tech’s focus on specialty products with high levels of value-added processing aligns with our business model and strategy of investing in high-quality, high-margin businesses.” The company reported annual sales of approximately $44 million in 2020. Russel Metals (TSX:RUS) is seeking acquisitions to further expand its U.S. service center footprint, announcing the $110 million purchase of Boyd Metals in November 2021. With the acquisition, Russel added five service centers in four U.S. states (AR, MO, OK, TX) that complement its existing footprint in the southern U.S. Boyd has invested in expanding its value-added processing services over the past several years, according to a press release announcing the transaction. In addition to primarily carbon steel products, Boyd’s product mix also includes stainless steel, aluminum, and other related industrial products. The deal follows the acquisition of Sanborn Tube Sales in December 2020, a Wisconsin-based service center with an emphasis on value-added processing, which is expected to accelerate Russel’s “strategic plans in the area,” commented Russell CEO John Reid. Sanborn is both a customer and supplier to Russel’s Wisconsin division, Reid said.
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