Reliance Steel & Aluminum to acquire PNA Group for $1.1 billion

18 June 2008

Reliance Steel & Aluminum Co., the largest US metals distributor, agreed to buy PNA Group Holding Corp. for about $1.1 billion to add operations in the US and expand in the Mexican market. The seller is Calif.-based private equity firm  Platinum Equity LLC, which it bought in May 2006 for $365 million fromGermany's TUI AG, which had sold off industrial assets as it built up its tour and travel business

Reliance, which has no relation to the Ambani brothers' companies, processes and distributes more than 100,000 metal products, and has made more than 35 acquisitions since selling shares to the public in 1994 to meet rising metals demand. It operates in about 180 locations in the US and about 37 across Belgium, Canada, China, South Korea and the UK.

Los Angeles-based Reliance Steel reported 2007 revenues of $7.3 billion and has a market capitalisation of $5.3 billion. It expects to finance the deal, including PNA's existing debt, through its existing credit facility and by raising about $750 million by issuing new debt and equity securities. The deal is expected to close in 60 days.

 ''The PNA operations complement our existing business and add new products in many geographic areas that further enhance the customer, product and geographic diversification of our business. Through the PNA joint ventures, we also gain entry into a new market for us in Mexico,'' said David H. Hannah, chairman and chief executive officer.

On the financing, Hannah stated, ''We expect that this transaction, including the impact of the expected financing, will be immediately accretive to our earnings, with the dilution from any new shares issued offset by the earnings from PNA and savings from our lower cost of capital. Additionally, we expect our balance sheet and liquidity to remain strong.''

''PNA has been a terrific investment for us from a return standpoint,'' said Jacob Kotzubei, the partner who led the PNA investment. ''It's also proven to be a great example of our approach in identifying companies that need operational support to reach their full potential, and then unlocking value through a combination of both operational initiatives, add-on acquisitions and strong partnership with the management team.''