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Buyouts abound, prices astound in 'year of the M&A'.

Article Excerpt
THOUGH 2006 WAS ANOTHER outstanding year for most producers and distributors, with metals prices at unusual heights, the market is bracing for a slowdown. Indeed, anticipation of moderating conditions may have fueled the year's resurgence of industry consolidation.

Reviewing the headlines of the past 12 months reveals a mergers and acquisitions theme, as mills and service centers alike, flush with cash from a string of successful years, jockeyed for position in various markets.

Among notable deals announced in 2006 on the service center side:

* Reliance Steel & Aluminum Co.'s acquisitions of Earle M. Jorgensen Co. early in the year, and Yarde Metals late in the year, along with a handful of smaller transactions, gave Reliance a size that rivals perennial market leader Ryerson Inc.

* ThyssenKrupp Materials NA expanded its presence in Canada with acquisitions of The Hearn Group and the VPK Metals chain.

* Platinum Equity's purchase of PNA Group's Feralloy, Delta Steel and Infra-Metals operations, and later Metals Supply Co. Ltd., signaled outside investment firms' growing interest in the service center market.

Esmark Inc. continued to make a splash by adding to its distribution holdings, but raised the most eyebrows when it secured board support for its acquisition of Wheeling-Pittsburgh Steel Corp. While it's certainly unusual for a service center company to acquire a mill, Esmark makes a good case for its goal to become a vertically integrated steel supplier.

Similarly, mega-deals in the steel, aluminum and copper producer segments changed the competitive landscape around the globe:

* After a contentious courtship, Mittal Steel persuaded Arcelor's board to merge the two steel giants, forming Arcelor Mittal, the largest steel company in the world with a capacity of more than 120 million tons.

* In the pipe and tube sector, Europe's Tenaris S.A. acquired Maverick Tube Corp. in a $3 billion transaction.

* Following a failed merger attempt between Phelps Dodge Corp., Falconbridge and Inco, Phelps Dodge agreed to merge with Freeport-McMoran Copper & Gold Inc., forming the world's largest publicly traded copper company.

* Russia's Rusal and SUAL Group, and Switzerland's Glencore International AG, agreed to merge their respective assets into United Company Rusal, creating the world's largest aluminum and alumina producer.

Steel prices rose and fell during the course of the year, but remained well above historical averages. Aluminum and copper prices, in the meantime, hit dizzying heights. Such unusually high metals prices, and margins, enabled the many mergers and no doubt contributed to the urgency behind the dealmaking in 2006.

On the international trade front, friction over China's economic policies and...