Klöckner to sell seven US locations to Russel, one to Service Steel Warehouse

Russel noted that the transaction would include approximately $67 million in working capital and $52 million in property, plants, and equipment (PP&E).

The company said it would buy service centers in the following locations: Dubuque, Iowa; Charlotte, N.C.; Suwanee, Ga. (near Atlanta); Houston; Austin, Texas; Jacksonville, Fla.; and Pompano Beach, Fla.

Klöckner said it had also agreed to sell an eighth facility – in Amarillo, Texas – to Service Steel Warehouse, a Houston-based distributor. It did not disclose terms of the deal with Service Steel Warehouse.

Both deals remain subject to closing and other conditions.

The strategies

Klöckner said the divestments formed part of a broader strategy of focusing on higher value markets.

“We will continue to position Klöckner & Co for higher profitability and sustainable growth in our attractive markets in North America and Europe, while reducing our exposure to cyclical commodity markets,” company CEO Guido Kerkhoff said in a statement.

Russel said the acquisition formed part of its long-term strategy of growing in the US. The company also said the seven plants it is buying fit well within its existing footprint in the States.

Once Russel closes the deal, approximately 50% of its revenue will come from the US. That’s up from 30% in 2019 and 39% in 2024, Russel President and CEO John Reid said in a statement.

“We believe this acquisition will provide operating benefits through enhanced inventory management, procurement, and re-investments in facility modernizations and value-added equipment,” Reid added. Russel expects those investments to happen over the next 2-3 years.

Background

Based in Duisburg, Germany, Klöckner is one of the largest service centers and metal processors in the world. Its business is primarily focused on Germany, Austria, Switzerland, and North America. Its US subsidiary, Kloeckner Metals Corp., is based in Roswell, Ga.

Toronto-based Russel Metals is one of the largest service centers and distributors in North America. It has three primary business segments: metals service centers, energy field stores, and steel distributors.