Reliance Steel & Aluminum (RS) is slated to acquire Metals USA Holdings Corp (MUSA) in the second quarter of 2013, adding $2 billion of annual sales to its income statement with synergies up to $30 million, says Arun Viswanathan, Senior Equity Analyst at Longbow Research.
“More importantly, this acquisition will be immediately accretive upon closing in the second quarter. We estimate the accretion to be anywhere from $0.25, which assumes no synergies up to $0.50 or $0.60, which assumes $20 million to $25 million of synergies, which is relatively conservative,” Viswanathan said.
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Management at Reliance has targeted at least $10 million of synergies for the Metals USA acquisition, but that is only a corporate cost removal amount, and Viswanathan believes that growth in both businesses and procurement cost savings could push synergies even higher.
“I think that if they are able to increase their depth of relationship with certain customers and continue to grow their Metals USA and Reliance business, and further obtain procurement — steel-buying — cost savings, I think total synergies could be closer to $25 million or $30 million, in which case accretion would be $0.50 to $0.60 of EPS on annual basis,” Viswanathan said.
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