Reliance, Inc. Agrees to Acquire Tolling Assets from FerrouSouth

Rhea-AI Summary

Reliance, Inc. (NYSE: RS) has announced an agreement to acquire certain assets of FerrouSouth, a division of Ferragon FerrouSouth, based in Iuka, Mississippi, offers high-quality flat-rolled steel processing and logistics services in the growing Southeastern market. The acquired operations will become part of Reliance's subsidiary, Feralloy FerrouSouth's annual net sales for 2023 were approximately $15 million. The transaction, with undisclosed terms, is expected to close within 30 days, subject to customary conditions.

Karla Lewis, President and CEO of Reliance, stated that this acquisition will expand Feralloy's toll processing capabilities and capacity in the Southeastern United States. The integration is expected to drive growth for FerrouSouth's operations, leveraging Reliance's scale, customer relationships, and industry expertise.

Positive

• Expansion of toll processing capabilities in the growing Southeastern market
• Addition of $15 million in annual net sales
• Expected growth of FerrouSouth's operations as part of Feralloy
• Leveraging Reliance's scale, customer relationships, and industry expertise

Negative

• None.

Financial Analyst

The acquisition of FerrouSouth's tolling assets by Reliance, Inc. is a strategic move that can be seen from multiple financial angles. For one, the acquisition aligns with Reliance's ongoing efforts to expand its market presence and operational capabilities in the Southeastern United States. The annual net sales of $15 million from FerrouSouth's operations, although modest in comparison to Reliance's overall revenue, indicate a stable and potentially growing revenue stream.

From a short-term perspective, the immediate impact on Reliance's financial statements may be limited due to the undisclosed purchase terms. However, the long-term potential for increased toll processing capabilities and logistics services is significant. Investors could reasonably expect these enhanced capabilities to drive higher efficiency and possibly higher margins, provided Reliance effectively leverages its existing customer relationships and expertise.

It is also worth noting that integrating FerrouSouth’s operations could entail initial costs related to restructuring or operational streamlining. However, given Reliance's scale and experience, these are likely manageable and may present opportunities for operational synergies.

Market Research Analyst

The acquisition of FerrouSouth’s tolling assets by Reliance is particularly noteworthy from a market dynamics perspective. FerrouSouth is positioned in the rapidly growing Southeastern market, a region that has seen substantial investment in infrastructure and manufacturing in recent years. This positioning allows Reliance to capitalize on regional growth trends, potentially securing a stronger foothold in an expanding market.

Additionally, the logistics services offered by FerrouSouth, including shipping and warehousing solutions, complement Reliance's existing operations and could enhance its supply chain capabilities. This can lead to improved logistics efficiency and customer satisfaction, which are critical in the highly competitive steel processing industry.

Furthermore, the integration under Feralloy Corporation, a subsidiary of Reliance, suggests a strategic alignment with Reliance's broader business goals. This integration could provide FerrouSouth with access to better resources and a wider customer base, thereby enhancing its growth potential.

Industry Expert

Reliance's move to acquire FerrouSouth's tolling assets can also be examined from an industry perspective. The toll processing of flat-rolled steel is a niche yet essential part of the steel supply chain, offering value-added services that can optimize production efficiencies for manufacturers. This acquisition allows Reliance to broaden its service offerings and increase its market share in this specific segment.

Moreover, the Southeastern United States has been a hub for automotive and manufacturing industries, sectors that are heavy consumers of flat-rolled steel. By enhancing its processing capabilities in this region, Reliance aligns itself with industry needs, potentially bolstering its attractiveness to key industry players looking for reliable, local processing solutions.

Reliance's scale and comprehensive expertise compared to a smaller operator like FerrouSouth could unlock additional value through optimized operations and cost efficiencies. However, the true success of this acquisition will hinge on how well Reliance integrates these new assets and leverages them to meet increased demand effectively.

SCOTTSDALE, Ariz., July 15, 2024 (GLOBE NEWSWIRE) -- Reliance, Inc. (NYSE: RS) announced that it has reached an agreement to purchase certain assets of the FerrouSouth division of Ferragon Corporation (“FerrouSouth”), a premier toll processing operation headquartered in Iuka, Mississippi. In addition to offering high quality flat-rolled steel processing, FerrouSouth provides logistics services including shipping and warehousing solutions within the rapidly growing Southeastern market. The FerrouSouth operations will operate as a division of Feralloy Corporation, a wholly owned subsidiary of Reliance. For the twelve months ended December 31, 2023, annual net sales for the select tolling operation were approximately $15 million. The terms of the transaction were not disclosed. The transaction is expected to close within the next 30 days, subject to customary closing conditions.

“The addition of FerrouSouth’s tolling operations helps expand our toll processing capabilities and provides additional capacity to Feralloy through its existing operations in the Southeastern United States,” commented Karla Lewis, President and Chief Executive Officer of Reliance. “FerrouSouth’s tolling operation is expected to grow as part of Feralloy and will benefit from being a part of Reliance due to our scale, strong customer relationships, deep knowledge base and breadth of expertise throughout our extensive family of companies.”

About Reliance, Inc.
Founded in 1939, Reliance, Inc. (NYSE: RS) is a leading global diversified metal solutions provider and the largest metals service center company in North America. Through a network of more than 320 locations in 40 states and 12 countries outside of the United States, Reliance provides value-added metals processing services and distributes a full-line of over 100,000 metal products to more than 125,000 customers in a broad range of industries. Reliance focuses on small orders with quick turnaround and value-added processing services. In 2023, Reliance’s average order size was $3,210, approximately 51% of orders included value-added processing and approximately 40% of orders were delivered within 24 hours. Reliance, Inc.’s press releases and additional information are available on the Company’s website at reliance.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expect,” “anticipate,” “believe,” and similar words. These forward-looking statements may include statements concerning Reliance’s acquisition of FerrouSouth and discussions of Reliance’s future performance. Forward-looking statements involve known and unknown risks and uncertainties and are not guarantees of future performance. The expected benefits of the transaction may not materialize as expected. Actual outcomes and results may differ materially from these forward-looking statements as a result of various important factors, including, but not limited to, those disclosed in our most recent Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) and subsequent reports. These forward-looking statements are based on management's expectations and assumptions as of today’s date and Reliance disclaims any obligation to publicly update or revise any forward-looking statements.

CONTACT:
(213) 576-2428
investor@reliance.com

or Addo Investor Relations
(310) 829-5400

FAQ

What assets is Reliance (RS) acquiring from FerrouSouth?

Reliance is acquiring certain assets of FerrouSouth's tolling operations, including high-quality flat-rolled steel processing and logistics services in the Southeastern market.

How much were FerrouSouth's annual net sales for the acquired assets in 2023?

FerrouSouth's annual net sales for the select tolling operation were approximately $15 million for the twelve months ended December 31, 2023.

When is the Reliance (RS) acquisition of FerrouSouth assets expected to close?

The transaction is expected to close within 30 days of the July 15, 2024 announcement, subject to customary closing conditions.

How will the FerrouSouth acquisition benefit Reliance (RS)?

The acquisition will expand Reliance's toll processing capabilities, provide additional capacity to Feralloy in the Southeastern US, and is expected to drive growth leveraging Reliance's scale, customer relationships, and industry expertise.