10:45 AM EDT, 09/29/2025 (MT Newswires) -- (Adds share price move in 1st paragraph and National Bank commentary from 7th paragraph)

Russel Metals ( RUSMF ) was at last look up 2.3% after it over the weekend entered into an agreement to buy seven service center locations from Kloeckner Metals Corporation for approximately US$118.6 million, a move that means its revenue base will be more than 50% in the United States going forward.

A statement noted the acquisition, subject to closing working capital and other normal course adjustments, includes the working capital, real estate, buildings and equipment, along with the operating personnel for the seven locations. The purchase price is based on the net book value of the working capital which was nearly $67.1 million at June 30, 2025, plus $51.5 million for the property, plant and equipment.

Russel will acquire Kloeckner's metals service centers in Dubuque (Iowa), Charlotte (North Carolina), Suwanee (Georgia), Houston (Texas), Austin (Texas), Jacksonville (Florida) and Pompano Beach (Florida). For the period between January 1, 2023 and June 30, 2025, the seven service centers generated average annual revenues of approximately $500 million and average annual adjusted EBITDA of approximately $20 million.

John Reid, President and CEO of Russel, said "The acquisition of these seven locations is a complementary fit with our existing U.S. locations, as they will tie into our footprint in key regions of Florida/Georgia, Texas, the Carolinas and Iowa/Wisconsin. In addition, this transaction is a continuation of our long-term growth strategy in the US. Upon completion of this transaction, our revenue base will be more than 50% in the US, as compared to 30% in 2019 and 39% in 2024. We look forward to having approximately 350 Kloeckner employees join the Russel team."

"We believe this acquisition will provide operating benefits through enhanced inventory management, procurement, and re-investments in facility modernizations and value-added equipment. These initiatives are expected to be implemented over a 2-3 year period," added Reid.

Russel said the transaction will be financed from its cash on hand or drawings under its existing credit facility, which totaled $566 million on June 30, 2025. The transaction is subject to customary closing conditions and is expected to close in Q4 2025 or Q1 2026.

Bottom line for National Bank is the cresting of the 50% U.S. exposure threshold. It noted management has already suggested that incremental capital deployment would be going towards the U.S. and the Kloeckner deal fits perfectly into RUS's "burgeoning and densifying" U.S. platform.

National said: "We should assume a similar to Samuel blueprint here -- working capital efficiency while also helping to bring the acquired EBITDA to RUS's target ranges by investing into the facilities, purchasing power heft, and best practices from a return-focused RUS. We continue to view RUS as a direct beneficiary of a still healthy HRC backdrop (even though the hot-rolled coil benchmark has retreated by -15% from March highs, something that the Street will need to reflect in its second half of 2025 expectations).

"Overall," National added, "we continue to see the company compounding its operational capabilities, judiciously allocating capital into assets where inventory, facilities or processes present a value-enhancing opportunity. As Russel's revenue exposure to the U.S. continues to scale up, we expect the trading multiple to re-rate closer to that of Reliance Inc. , especially given the companies' similar ROIC profiles.

National reiterated its Outperform rating and $55.00 price target on RUS shares; Its target price is derived using a 7.5x EV/EBITDA multiple on blended 2025E/2026E forecasts.

Price: 40.82, Change: +0.83, Percent Change: +2.08