Steel trading and processing group Trasteel is growing through selective acquisitions as part of the group’s opportunistic strategy and low-risk trading model, chief executive Gianfranco Imperato has said.
During a podcast by investment analysis firm SPACInsider, monitored by Kallanish, Imperato describes Trasteel as sitting in the middle of the steel supply chain, acting as a customer to producers and supplier to end-users.
Despite being considered a mature market, steel in reality is imperfect, with price differences existing not only over time but also geographically, while industrial assets can at times become available at undervalued prices.
“Therefore, there is a significant possibility to make capital gains out of buying and selling companies, not only buying and selling products,” he says.
On acquisitions, Imperato says the group targets specific opportunities as they arise rather than following a fixed strategy. He points to three recurring scenarios: European companies in a succession phase where founders have no heirs involved in the business, companies struggling to finance their working capital, and companies where partners are in dispute.
He notes that the steel sector’s high working capital intensity makes it unattractive to private equity and financial institutions, creating an opening for operators with the right management skills. When evaluating targets, the group prioritises cost efficiency and management quality.
“Obviously revenues are necessary, but you are a winner if your costs are under control. And this is the key two points of the cost efficiency and the management skills that we are searching before entering into a deal,” Imperato adds.
He is also keen to remain independent from steel production. “Steel production is very cyclical. It takes much more capital, it takes a totally different approach. In reality, we manage a spread between a semi product and the product and we manage a service to many customers that are populating our market.”
Additionally, he argues that the return of trade barriers and supply chain disruptions has restored the value of skilled intermediaries after years of disintermediation during the globalisation era. He highlights when a small entrepreneur from Milan could fly to Vietnam and source coils directly.
“Complications in the world are generating the need [for] operators like us, believed to be able to run around the obstacles that are put in by the politics or geopolitics or by the international trade complications,” he says.
Imperato is clear that Trasteel does not speculate on prices and points to the Iran crisis as an example. Some orders coming from Oman had to be sourced from a different mill when the original supply was disrupted at short notice without taking direct price exposure. “We believe it’s better to have a small but constant margin rather than running risks on speculations which are by definition not always right,” he says.
During the podcast Jamie Carson, vice chairman of Sizzle Acquisition Corp 2, says Trasteel’s hedged business model, global customer base and low inventory risk approach were the key attractions of the deal.
Trasteel is going public through a merger with Sizzle Acquisition Corp. II, a Cayman Islands-based special purpose acquisition company listed on Nasdaq under the ticker Szzl. It will list on Nasdaq through a $1.3 billion ($1.5 billion) business combination.
