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California and the West

Reliance Steel to Buy Jorgensen

January 18, 2006|Bill Sing and Tom Petruno | Times Staff Writers

Los Angeles-based Reliance Steel & Aluminum Co. agreed to acquire Lynwood-based Earle M. Jorgensen Co. for $13 a share, or about $934 million, Reliance announced late Tuesday.

The planned merger would bring together two Southland companies capitalizing on growing global demand for steel and other metal products. Reliance is one of the nation's largest metal processing companies, while Jorgensen is one of the largest distributors of metal products in North America.

"We will significantly increase our geographic, product and customer diversification by combining with an industry peer that complements our reputation for excellence and our corporate culture," Reliance Chief Executive David H. Hannah said.

The price represents a premium of about 25% over Jorgensen's closing price Tuesday of $10.43, up 18 cents from the day before the announcement.

Reliance said it would pay half the acquisition price in cash and half in stock. The deal is expected to be completed in the second quarter, Reliance said. Upon completion of the acquisition, Reliance said it would have total assets of approximately $3 billion and annual revenue of more than $5 billion.

Reliance, which went public 11 years ago, has carved out a profitable business as a nationwide processor and distributor of metal products. It has completed more than 30 acquisitions of smaller metals-processing companies since 1994.

Reliance earned $49.4 million in the third quarter on sales of $870 million.

Reliance's shares soared 57% last year and recently hit a record high of $69.23. They closed Tuesday at $65.75, up 95 cents, before the merger news.

Jorgensen, for years one of the Southland's largest privately held companies, was founded by Earle M. Jorgensen, who came to Los Angeles after World War I and started combing shipyards for scrap metal. Jorgensen, who became a member of President Reagan's so-called kitchen cabinet, died in 1999 at age 101.

Jorgensen earned $18.9 million in the third quarter on sales of $413 million.

Jorgensen went public in April at $10 a share, but the stock fell on its first trading day, ending at $9. It slumped under $7 by mid-May but has recovered since.

Jorgensen was hoping to raise $300 million in its initial offering. Instead, the company raised about $176 million, selling just 17.6 million shares instead of 20 million. The money was to be used to buy out the holders of the company's preferred stock, which was held mostly by management.

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