Russel Metals and Marubeni-Itochu to merge their OCTG/line pipe businesses
Russel Metals will contribute net assets with a book value of approximately $111 million.
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TORONTO — On Apr. 14, Russel Metals Inc. announced that it had entered into an agreement with Marubeni-Itochu Tubulars America Inc., whereby Russel Metals and MITI will combine their respective Canadian OCTG/line pipe businesses. In conjunction with the combination, Russel Metals will receive a substantial portion of its contributed net asset value in cash proceeds, in addition to retaining a 50% equity interest in the combined venture.
Currently, Russel Metals operates its Canadian OCTG/line pipe business through its wholly owned subsidiary Triumph Tubular & Supply Ltd., and MITI operates its Canadian OCTG/line pipe business through its wholly owned subsidiary Hallmark Tubulars Ltd. The combined business of Triumph and Hallmark will operate under a newly incorporated company, named TriMark Tubulars Ltd.
Over the past several years, the macro business conditions for the OCTG/line pipe industry have changed substantially as a result of a challenging energy market as well as the disintermediation of distributors by certain direct-to-market manufacturers. As a result, this combination will hopefully create a business that has the necessary economies of scale, including a diverse product offering and business platform to more efficiently and effectively serve its customers.
John Reid, President and CEO of Russel Metals commented, “Over the past nine months, we have been strategically focused on both rationalizing the operations and reducing the capital deployed in our OCTG/line pipe businesses. This transaction provides an opportunity to substantially repatriate capital for deployment in other value enhancing opportunities, but also retain an ongoing interest and participate in the future success of the combined business. We would like to thank the Triumph team for their tremendous efforts in repositioning the business over the past year, and we look forward to working with MITI on a shared vision for TriMark.”
Russel Metals will contribute net assets with a book value of approximately $111 million, subject to adjustments, primarily comprised of Triumph’s inventories less its accounts payables.