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Reliance Steel Closes GH Metal Buy

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Reliance Steel & Aluminum Co. (RS) said that its fully-owned subsidiary, Feralloy Corporation, has wrapped up the acquisition of all of the outstanding shares of Alabama-based steel processor, GH Metal Solutions, Inc. The terms of the deal, which was announced last month, remained undisclosed.

GH Metal Solutions, erstwhile known as Gas House, Inc., processes and fabricates carbon steel products. Its processing equipment includes flat-bed lasers, tube lasers, torches, shears, automatic band saws, and robotic and manual welders. The entity, which has annual sales of roughly $44 million, will now operate as a fully-owned unit of Feralloy Corporation with its current management remaining in place.

Reliance Steel continues its acquisition spree to incite growth. The company recently purchased Texas-based privately-held Sunbelt Steel Texas, LLC to expand its foothold in the energy space.

Earlier, in July 2012, the company purchased the assets of Airport Metals, marking its first foray into the Australian market. It also bought all the assets of the Worthington Steel Vonore plant from Worthington Industries Inc. (WOR), in April 2012. The acquisition reinforced its foothold in the Southeastern regions of the U.S.

These moves are in sync with Reliance Steel’s philosophy of growing inorganically. The strategic acquisitions are expected to drive growth moving forward through improved product offerings and expansion into new markets.

Reliance Steel continues to evaluate and execute additional growth projects and is well placed to leverage the strong momentum across a number of end markets. However, we are concerned about the non-residential construction market (the company’s largest end market), which continues to be the weakest link.

Reliance Steel currently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.

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