North American service centre chain Russel Metals and Marubeni-Itochu Tubulars America plan to merge their Canadian energy tubulars businesses, Kallanish learns from a company statement.
Triumph Tubular & Supply and Hallmark Tubulars – the Canadian energy tube businesses of Russel and Marubeni, respectively – will be merged into a new joint venture dubbed TriMark Tubulars.
Russel notes that the energy tubulars market has changed markedly in past years “…as a result of a challenging energy market as well as the disintermediation of distributors by certain direct-to-market manufacturers,” the company says. “As a result, this combination will create a business that has the necessary economies of scale, including a diverse product offering and business platform to efficiently and effectively serve its customers.”
While not directly named, the statement seems to be a reference to Tenaris’ Rig Direct program, which effectively sidesteps distribution in favour of selling directly to end-users.
Russel’s asset contribution to the 50:50 joint venture will be about $111 million. For that, it will receive $79m in cash, $32m in shares, and the aforementioned 50% interest.
“Over the past nine months, we have been strategically focused on both rationalising the operations and reducing the capital deployed in our OCTG/line pipe businesses,” says Russel ceo John Reid. “This transaction provides an opportunity to substantially repatriate capital for deployment in other value enhancing opportunities, but also retain an ongoing interest and participate in the future success of the combined business.”
Dan Hilliard USA
