Why Metals USA and Reliance Steel Shares Jumped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Metals USA jumped as much as 13% today after Reliance Steel & Aluminum agreed to acquired it for $766 million. Reliance shares were up as much as 10% on the news.

So what: The $766 million price tag is equivalent to $20.65 a share, 13% above yesterday's closing price of $18.30, so it's no surprise to see Metals' gain matching the premium. The deal includes a 30-day period allowing Metals to shop itself to other bidders, and Metals USA will keep its brand name. Both boards have unanimously approved the acquisition, but it is still awaiting agreement from Metals shareholders.


Now what: Two lawsuits charging a breach of fiduciary duty have already been announced, but litigation often follows acquisitions and shouldn't prevent it from happening. Targets of acquisitions often jump after the buyout is announced, but it's rare to see the acquirer gaining this much. Clearly, the market thinks Metals USA and its 48 distribution centers will enhance Reliance's strategic position, already the country's largest metals service-center company.

Get more info on Metals USA and Reliance.

The article Why Metals USA and Reliance Steel Shares Jumped originally appeared on Fool.com.

Fool contributor Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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