June 17, 2008
Platinum Equity Signs Agreement to Sell PNA Group
Platinum Equity announced today that it has signed a definitive agreement to sell PNA Group, a leading processor and distributor of steel products, to Reliance Steel & Aluminum Co. (NYSE:RS) in a transaction valued at approximately $1.1 billion.
The transaction is expected to be finalized within the next 60 days, subject to normal closing conditions including regulatory approval.Platinum acquired PNA Group in May, 2006 and created substantial value in the business through a combination of operational initiatives and add-on acquisitions. PNA's revenue in 2007 was approximately $1.6 billion, up from approximately $1.2 billion in annual revenue when Platinum acquired the business.
"We knew the business had enormous potential when we acquired it, and we were convinced that with strong leadership and the right operational focus, we could turn a good company into a great one," said Tom Gores, Chairman and CEO of Platinum Equity. "We were fortunate to get Sandy (Nelson, CEO of PNA) to join us in this investment, and he and the entire PNA team helped us deliver on that promise. We look forward to Reliance Steel & Aluminum's continued success with the business."
PNA Group processes steel and distributes it to fabricators, manufacturers and distributors, primarily in the United States. The company comprises several independent business units, each of which process and distribute to customers a variety of metal products including steel structural beams, channels, tubes and plates; coiled and rolled steel; and other structural steel products.
Reliance Steel & Aluminum, based in Los Angeles, said the acquisition of PNA Group would complement its existing business and enhance its customer offerings.
Platinum Equity executives said that while the firm does not disclose individual investment returns, the PNA Group investment has been very successful for Platinum and its institutional investors.
"PNA has been a terrific investment for us from a return standpoint," said Jacob Kotzubei, the partner who led the PNA investment. "It's also proven to be a great example of our approach in identifying companies that need operational support to reach their full potential, and then unlocking value through a combination of both operational initiatives, add-on acquisitions and strong partnership with the management team."
Following the acquisition of PNA in May 2006, Platinum completed three add-on acquisitions that bolstered and expanded the company's capabilities, acquiring Metals Supply Co., Precision Flamecutting and Steel, and Sugar Steel. Each of those acquisitions complemented operational initiatives underway inside the main PNA platform, Mr. Kotzubei said.
PNA Group and its add-on acquisitions are among several successful industrial and metals services acquisitions Platinum Equity has made over the past three years, including:
-- In December 2005 the firm acquired ESM Group, which provides a variety of products and services to the steel industry, including desulphurization and secondary metallurgy services, caster segment maintenance, equipment design and manufacture. The seller was Degussa AG, a global specialty chemicals manufacturer based in Germany. After reorganizing the business and establishing it as a strong standalone company, Platinum sold ESM Group to a strategic acquirer, SKW Metallurgie, in October 2007.
-- In October 2007 the firm acquired Ryerson Inc., one of the largest metals service center providers in North America with revenue of approximately $6 billion. The Ryerson business is currently involved in the normal post-acquisition operational transition into the Platinum Equity portfolio.
Legal advisers to Platinum Equity on the sale of PNA Group to Reliance Steel & Aluminum were James W. Loss and Todd Hentges of Bingham McCutchen. Financial advisers to Platinum Equity were Citi, Goldman Sachs & Co. and UBS Investment Bank.
About Platinum Equity
Platinum Equity (www.platinumequity.com) is a global M&A&O(R) firm specializing in the merger, acquisition and operation of companies that provide services and solutions to customers in a broad range of business markets, including information technology, telecommunications, logistics, metals services, manufacturing and distribution. Since its founding in 1995 by entrepreneur Tom Gores, Platinum Equity has acquired more than 80 businesses with more than $24 billion in aggregate revenue at time of acquisition.