Reliance Steel & Aluminum Co. - Company Profile, Information, Business Description, History, Background Information on Reliance Steel & Aluminum Co.

2550 East 25th Street
Los Angeles, California

History of Reliance Steel & Aluminum Co.

The Reliance Steel & Aluminum Co. is the second-largest West Coast-based metals processing and distribution company in the United States. In 1997, the company operated more than three dozen metals service centers in 14 states, more than half of them in California. The company buys steel and nonferrous metals in bulk from primary producers and cuts it to size for smaller buyers. According to the 1996 annual report, Reliance regularly distributed more than 20,000 metal products to 30,000 customers in various industries.

In an industry dominated by small, family-owned businesses, Reliance grew from a single metals-processing center in Los Angeles into a major corporation by acquiring more than three dozen competitors during its nearly 60-year history. In an interview with an industry publication in 1992, Joe D. Crider, then president and chief operating officer, explained, "You can pay the bill [for higher market share] through price cutting, or through paying goodwill to buy a competitor. In cutting prices, you often trash the marketplace. So over time, the latter route is usually the less expensive, as long as you buy at a reasonable price."

Growth through Acquisition, 1939-1987

Reliance Steel & Aluminum Co. was founded in Los Angeles in 1939 by Thomas J. Neilan. Originally named Reliance Steel Products Co., the business made and sold steel reinforcing bars (rebar) for the construction industry. In 1944, the name was shortened to Reliance Steel Co.

In 1948, Reliance Steel also began manufacturing products of aluminum and magnesium. As William T. Gimbel, Neilan's nephew who joined the company as a trainee in 1947, later told Metal Service News, "We started out (in 1939) with the dirty, old, down-in-the-gutter carbon steel, but that became a world commodity. So we decided that we wanted to upgrade into something that had a little bit more pizzazz, and we picked aluminum and magnesium."

Gimbel, who started as a warehouse man, succeeded Neilan as president of the company in 1957, a year after the company name was changed to Reliance Steel & Aluminum. Under Gimbel Reliance began its long-running territorial expansion, naming a resident sales agent in Phoenix in 1958. Two years later, Reliance acquired a small Phoenix-based competitor, the Effron Steel Co. With the purchase of another competitor, the Westates Steel Co., in Santa Clara, Reliance Steel expanded into Northern California in 1961.

In 1963, Reliance continued its growth through acquisition by purchasing the Drake Steel Supply Co., which operated metals service centers in Fresno and San Diego, California. With the purchase, Reliance also acquired the services of Joe D. Crider, who had joined Drake in 1949 as a billing clerk and worked his way up to Fresno sales manager. After several years as manager of Reliance Steel's Los Angeles division, Crider was named executive vice-president in 1975, teaming up with Gimbel to form what Metal Service News would later call "perhaps the best known management team in the service center industry."

In 1966, Reliance extended its reach into Texas by acquiring metals service centers in Dallas and San Antonio from Delta Metals, Inc. Two years later, the company bought out another Los Angeles competitor, the Catalina Steel Co., its fifth acquisition in 10 years. By then, Reliance Steel had also established SupraCote, a coil-coating division, in Cucamonga, California. It became a separate subsidiary in 1973, and was sold to a management group in 1980.

Reliance Steel acquired Southern Equipment & Supply Co., San Diego's oldest metals service center, in 1972, and immediately launched a $1.8 million project to double the size of the San Diego facility. Two years later, the rapidly growing company announced a $4 million expansion in Los Angeles.

Reliance Steel also wanted to strengthen its position in Texas, and after attempting to acquire a Houston business, temporarily abandoned its acquisition philosophy and opened a new metals service center in the port city in 1975. Gimbel told Metal Service News, "we had spent probably two years trying to buy out somebody, but at the time there was a big boom there, and everyone felt the streets of Houston were paved with gold. We just could never make a deal to buy someone. So we started our own company." Reliance closed the Houston center in 1984 due to a slump in the oil industry.

Reliance also ventured into the Eastern United States for the first time in 1975 when it acquired the Purchased Steel Products Co., in Atlanta. The move never panned out, however, and Reliance sold the center in 1987. Gimbel told Metal Center News, "We learned a lesson in Atlanta. If we're going to go further east, that probably means the Chicago area. And you don't move into Chicago on a shoestring."

Specialty Metals Since the Late 1970s

After more than three decades of operating full-service metals service centers, Reliance opened its first "specialty store" in 1976, forming the Tube Service Co., in Santa Fe Springs, California. The subsidiary specialized in tubular products. A second Tube Service Co. opened three years later in Milpitas, California. In 1977, Reliance also acquired Bralco Metals, in Pico Rivera, California, which specialized in brass, aluminum, and copper. To manage its aluminum, magnesium, and stainless steel products, Reliance created a nonferrous metals division, Reliance Metalcenter, in 1980.

In 1980, Reliance also acquired Foucar, Ray & Simon, a specialty tube distributor in Hayward, California, with a branch in Portland, Oregon. The Hayward center was eventually merged into the Reliance center in Santa Clara. The Portland operation foundered and then closed in 1984. Gimbel told Metal Service News the acquisition had been a mistake. "Foucar was probably the second oldest service center in California, with a good reputation. They'd done well over the years, but I guess they'd gotten rigor mortis. We thought that we could change all that. We tried and tried to change it, and it didn't work. So we had to admit defeat and close up the place."

The setback, however, did not slow the company's aggressive growth. In 1981, Reliance purchased the Cd'A Service Center in Salt Lake City, Utah, from Spokane-based Cd'A Steel Service Center. The company then acquired Circle Metals in Carson, California, in 1983, and Tricon Steel & Aluminum in Fremont, California, and Arnold Engineering Co. in Fullerton, California, in 1984. Arnold Engineering Co. was renamed Arnold Technologies, Inc. and relocated to Anaheim. In the mid-1980s, Reliance gobbled up assets of the Ducommum Metals Co. in Phoenix and Los Angeles, the Lafayette Metal Service Corp. in Long Beach, California, and the assets of the Livermore, California, metals service center from Capitol Metals Co. The company also acquired the Valex Corp. in Ventura, California, which made stainless steel components for electronic and pharmaceutical applications, the Dallas/Forth Worth Russell Steel Division of the Van Pelt Corp., and the Morris Steel & Aluminum Co. in Albuquerque, New Mexico. In 1988, Reliance also acquired the Los Angeles Sheet & Steel Division from Earle M. Jorgensen Co.

The acquisitions certainly fueled growth. By 1988, the company's 50th year, sales topped $350 million. But the company continued to expand. Over the next two years, Reliance acquired the Albuquerque, New Mexico, assets of the Smith Pipe & Steel Co. and the Los Angeles and Phoenix operations of Lusk Metals. Other acquisitions in the 1990s included Affiliated Metals, an aluminum and stainless steel specialty center in Salt Lake City, Utah, and the Wichita, Kansas, operations of National Steel Service Center Inc., which stocked aluminum plate, sheet, and coil for the aerospace industry. The National Steel acquisition marked Reliance Steel's first foray into the Midwest.

Going Public in 1994

In 1994, after 55 years as a closely held company, Reliance issued its first public stock. At the time, Reliance Steel had about 180 stockholders, most of them company employees or relatives of founder Thomas J. Neilan. The company had previously considered, and rejected, going public several times. In 1984, Gimbel told Metal Service News, "We'd go and talk to the brokers, but, unfortunately, anything with the name steel in it didn't get them very excited." In its prospectus, Reliance also signaled its intention to continue growth through acquisitions: "Traditionally, metals service centers have been small, family-owned businesses that lack the diversity of experience and successful operating techniques of Reliance and thus have and may in the future become candidates for acquisition or consolidation."

A year later, Reliance acquired a 50 percent interest in American Steel, L.L.C. for $19 million, its largest purchase to date. That was followed in 1996 with the acquisition of VMI Corporation, an 11-year-old nonferrous metals service center in Albuquerque, New Mexico, and CCC Steel, Inc., which operated carbon-steel service centers in Los Angeles and Salt Lake City. Reliance also announced the acquisition of the Siskin Steel & Supply Company, Inc., with metals service centers in Chattanooga and Nashville, Tennessee, Spartanburg, South Carolina, and Birmingham, Alabama. Reliance Steel paid $71 million for the 47-year-old company, which had revenues of $151 million and would operate as a wholly owned subsidiary. David H. Hannah, then president, called the acquisition "an integral part of our strategy to become a national company with operations extending beyond the Western half of the United States."

In 1997, Reliance reported net income of $29.8 million on record sales of $654 million. It was the sixth consecutive year of record financial results. The company also acquired Amalco Metals, Inc., a metals service center company in Union City, California, that specialized in processing and distributing aluminum plate and sheet, and AMI Metals, Inc., a Brentwood, Tennessee, company that specialized in processing and distributing aluminum plate, sheet and bar products for the aerospace industry. AMI operated service centers in Fontana, California; Wichita, Kansas; Brentwood, Tennessee; Fort Worth, Texas; Kent, Washington; and Swedesboro, New Jersey.

Crider, who became chairman, succeeding Gimbel, who remained on the board of directors as chairman emeritus, said in interviews that he expected Reliance Steel to continue growing through acquisitions. Industry analysts expected Reliance to focus its expansion on the strengthening Midwestern market.

Principal Subsidiaries: Reliance Steel Division; Bralco Metals Division; MetalCenter, Inc.; Tube Service Co.; Affiliated Metals; Eureka Metals, Inc.; Siskin Steel & Supply Company, Inc.; CCC Steel, Inc.; American Steel, L.L.C. (50%); Valex Corp.

Additional Details

Further Reference

Berry, Charles, "The Art of the Deal: Growth by Acquisition," Metal Center News, December 1992.------, "Reliance Takes the Road Less Traveled," Metal Center News, December 1992.Cole, Benjamin Mark, "Reliance Steel Plans $51.7 Million IPO; Plans Listing on Big Board," Los Angeles Business Journal, October 3, 1994.------, "Man of Steel (Aluminum, Brass Too)," Los Angeles Business Journal, June 17, 1996, p. 17.Joch, Alan, "Tube Service Co.: A Generalist's Specialist," Metal Center News, December 1984.------, "When Entrepreneurs Manage Entrepreneurs," Metal Center News, December 1984.MacKey, William, "Flatrolled Vendor to the High-Tech Market," Metal Center News, December 1984."Reliance MetalCenters: A History of Innovation," Metal Center News, December 1984.

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