Reliance Steel Bids $766 Million for Metals USA


On Wednesday, metals service center Reliance Steel & Aluminumannounced that it has signed an agreement to acquire all outstanding shares of smaller rival Metals USA Holdings for $20.65 per share in cash. Factoring in Metal USA's cash and debt, the transaction is valued at $1.2 billion.

The purchase price represents a 13% premium over Metals USA's share price before disclosure of the buyout. Yet even so, at an enterprise value of 0.6 times Metals USA's $2 billion in 2012 revenue, the acquisition comes at a significant discount to Reliance's own enterprise value-to-sales ratio of 0.7. This may explain why Wall Street's reaction to the news was to bid up the share prices of both Metals USA (up 12.8% to $20.65 at close of trading) and Reliance Steel as well (up 8.6% to $70.25).

Reliance did note, however, that its offer contains a so-called "go shop" clause, permitting Metals USA to seek better offers elsewhere. Assuming it does not find a better price by March 8, the deal is expected to proceed and close in the second quarter of 2013.

The article Reliance Steel Bids $766 Million for Metals USA originally appeared on

Fool contributor Rich Smith andThe 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.