A new agreement to combine operations with a rival will help the firm compete in a more challenging energy market.
The firm already has a large client base and it should soon have a more diverse product offering and business platform.
RUSSEL METALS INC. (Toronto symbol RUS; www.russelmetals.com) lets investors tap one of North America’s largest metal distributors: the company serves 33,000 clients at 48 locations in Canada and 16 in the U.S.
Russel and Japan’s Marubeni-Itochu Tubulars America have now agreed to combine their respective Canadian OCTG/line pipe businesses. These units sell pipe to oil and gas companies.
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The combined business of Russel’s Triumph Tubular & Supply unit and Marubeni-Itochu’s Hallmark Tubulars unit will operate as a newly incorporated company, TriMark Tubulars.
Russel will contribute assets with a book value of about $111 million. In exchange, it will receive: (i) cash of approximately $79 million; (ii) preferred shares with a face value of $32 million and an annual dividend rate of 7%; and (iii) a 50% equity interest in TriMark. Russel Metals will also retain Triumph’s accounts receivables worth $59 million, for total cash proceeds of $138 million.
Value Stocks: New agreement will create economies of scale
Over the past several years, the business conditions for the OCTG/line pipe industry have changed substantially as a result of a challenging energy market as well as the move by some manufacturers to cut out the distribution middlemen and sell direct to energy customers.
The Russel-Marubeni-Itochu transaction is aimed at creating a business that has the necessary economies of scale, including a diverse product offering and business platform to efficiently serve their customers.
For 2020, Triumph generated revenues of $165 million. To put that into perspective, Russel had revenue of $2.7 billion in 2020.
Since the third quarter of 2014, Russel has paid quarterly dividends of $0.38 a share; the annual rate of $1.52 yields a high 4.6%.
Russel holds an Above Average TSI Dividend Sustainability Rating.
Thank you , this is timely after RUS has risen already substantially. The “BUY” recommendation should mean that the RUS stock most likely has at least an upside of ten percent or more. If it does not have more than a 5 % upside then you should say “HOLD” ; If you think that the RUS stock is at its peak even though the dividend is safe Then you should say “HOLD” for income. If you think that the RUS stock could decline by close to 10 % despite the dividend being safe then you should say “TAKE PROFITS'” . Your “BUY” signal is comforting provided that you have defined what you mean by “BUY”!! FOR EVERYONE of the TSI subscribers should have a definition of what you mean by the signals you give. PLEASE MAKE A SPECIAL MESSAGE DEFINING WHAT EXACTLY YOU MEAN BY YOUR SIGNALS !! AND USE “TAKE PROFITS” MORE OFTEN !!
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Thank you , this is timely after RUS has risen already substantially. The “BUY” recommendation should mean that the RUS stock most likely has at least an upside of ten percent or more. If it does not have more than a 5 % upside then you should say “HOLD” ; If you think that the RUS stock is at its peak even though the dividend is safe Then you should say “HOLD” for income. If you think that the RUS stock could decline by close to 10 % despite the dividend being safe then you should say “TAKE PROFITS'” . Your “BUY” signal is comforting provided that you have defined what you mean by “BUY”!! FOR EVERYONE of the TSI subscribers should have a definition of what you mean by the signals you give. PLEASE MAKE A SPECIAL MESSAGE DEFINING WHAT EXACTLY YOU MEAN BY YOUR SIGNALS !! AND USE “TAKE PROFITS” MORE OFTEN !!
excellent suggestion
has markets in canada & usa
AS NOTED IN THE ARTICLE…….New Agreement Will Create Economies Of Scale
i already have stock in RUS
Thanks Thomas. We still like Russel and this just adds to its prospects.