Nucor (NUE) To Take Over Southland Tube For $130 Million
Zacks Investment Research | Dec 06, 2016 09:41PM ET
Nucor Corporation (NYSE:NUE) has agreed to buy an independent producer of hollow structural section (“HSS”) steel tubing, Southland Tube, for $130 million. The purchase price represents roughly eight times the average EBITDA over 2011-2016.
Southland Tube has a facility spread over 40 acres in Birmingham, AL, which employs roughly 280 non-unionized workers. The facility’s location suits the HSS end market well. The company has annual shipments of about 240,000 tons, giving it the third largest market share in HSS steel tubing. Notably, HSS is required in a wide range of structural and mechanical applications, including non-residential construction, infrastructure as well as heavy equipment end-use markets.
This proposed buyout by Nucor complements the company’s recently completed acquisition of Independence Tube in HSS steel tubing. The acquisition of Independence Tube, which has the second largest market share in the HSS space, was completed on Nov 1, for $435 million. Nucor is aiming to gain importance in the market while providing an additional channel to market the company’s sheet steel mills. In 2006, Nucor's total steel mill shipments to downstream businesses accounted for 8%, which the company expects to grow to about 20% after these acquisitions.
Shares of Nucor closed about 0.7% higher at $65.58 on Dec 6.
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