Russel Metals (OTCPK:RUSM.F) M&A Announcement Transcript

Summary of Russel Metals Acquisition Conference Call Company and Industry - Company: Russel Metals (OTCPK:RUSM.F) - Industry: Metal service centers Key Points and Arguments 1. Acquisition Announcement: Russel Metals announced the acquisition of seven service centers in the U.S. from Kloeckner Metals, with a purchase price of approximately $119 million U.S. [1][5][6] 2. Transaction Structure: The deal took around six months to finalize and includes acquiring all fixed assets and working capital, with the working capital valued at $67 million as of June 30, 2025 [4][5] 3. Financial Impact: The acquired locations generated average annual revenues of around $500 million U.S. and adjusted EBITDA of over $20 million U.S. over the last two and a half years, which is expected to add about 15% to Russel's average annual revenues [6][8] 4. Geographic Expansion: The acquisition will enhance Russel's U.S. platform, increasing U.S. revenues from 44% to over 50% on a pro forma basis [8] 5. Operational Improvements: There are identified opportunities for efficiency gains in procurement, inventory management, and logistics by integrating the new locations into Russel's existing system [7][8] 6. Management Capacity: The management team is well-prepared to handle the integration of both the Kloeckner acquisition and the previous Samuel acquisition, with experienced personnel in place [19][20] 7. Margin Improvement Potential: The acquired locations have lower margins than Russel's overall service center margins, presenting an opportunity for improvement through operational adjustments and value-added processing [23][24][25] 8. Real Estate Ownership: All facilities acquired are owned by Kloeckner, and Russel does not currently plan to engage in sale-leaseback arrangements [32] 9. Hub-and-Spoke Model: The acquisition supports Russel's hub-and-spoke model, allowing for shared resources and value-added processing capabilities across locations [33][34] 10. Market Positioning: The acquisition does not significantly change Russel's focus on non-ferrous markets or automotive sectors, but it does enhance geographic reach to serve data centers and solar industries [38][40][43] Other Important Content - Transaction Timeline: The deal is expected to close in late 2025 or early 2026, with no regulatory approvals required [8] - Financial Flexibility: Russel has a strong capital structure with $566 million in liquidity as of June 30, 2025, allowing for the completion of this transaction and potential future acquisitions [9][11] - Historical Performance: The financial results of the acquired locations were significantly impacted by a poor performance in 2024, but 2025 results are expected to be materially better [46][47] - Goodwill Expectation: Russel does not expect any substantial goodwill from the acquisition [48]