November 16, 2009 Amtex Buy has Esmark Cutting Rug to Old Tune
Nov 16 2009, Daily AMM, By Corinna Petry
With its purchase of a service center near Chicago, Esmark Steel Group is looking to repeat the formula that worked so well earlier this decade—acquiring Midwest companies primarily focused on cold-rolled and coated sheet products, according to Thomas Modrowski, the company’s chief executive officer.
The division of Chicago’s Esmark Inc. has completed a $10- million acquisition of Amtex Steel Inc., a University Park, Ill.-based processor and distributor of flat-rolled and bar products for the light manufacturing and durable goods industries. Amtex has been renamed Chicago Steel & Iron.
Esmark last month signed a letter of intent to purchase a service center but didn’t identify the company. Market sources at the time said they believed it was Amtex (AMM, Oct. 14).
The purchase includes the plant and real estate, plus the company’s rail line facilities. Chicago Steel & Iron will become a wholly owned subsidiary of Esmark Steel Group, which itself intends to grow into a $250- million business by the end of next year.
“As for other potential acquisitions, we think we are in the market at the right time. You never hit it perfectly but it’s a good time to get in for value, and we like the model we had the first go-around—buying small family owned businesses. We expect to continue down that path, rebuilding another collection (of service center operations) in the Chicago and Midwest market,” Modrowski told AMM.
“Our intention is to retain all the employees, and we will probably supplement the work force with some key sales people and try to increase the volume that goes through this facility. We think we will need everyone here, all hands on deck, because we are energized about revitalizing the market,” he said on Monday while visiting with employees at the newly acquired business.
Apart from reassuring Amtex’s 70 employees, Chicago Steel & Iron’s initial work will be to “re-engage with suppliers and customers,” Modrowski said, adding that he believes Esmark’s re-entry into the service center business will “create a little excitement in the industry.”
Noting that there is tremendous value to be had, he said Esmark plans to capitalize on it on behalf of shareholders. “We are glad to be coming back,” he added.
Esmark will continue to explore acquisition opportunities, focused on cold-rolled and coated flat-rolled distribution, but it will also maintain other product lines any purchased companies have, such as Chicago Steel & Iron’s bar business.
Including the Chicago Steel & Iron acquisition, all purchases will be in cash. “We will not strap any facilities with debt,” Modrowski said.
Esmark Inc. was started in 2003 by brothers James P. Bouchard, chairman, and Craig T. Bouchard, vice chairman, with one service center in East Chicago, Ind. Its growth culminated in 2008 with the $1.23-billion sale of Esmark Inc.’s Wheeling-Pittsburgh Steel Corp. subsidiary and service center network to Russia’s OAO Severstal.
“As the economy improves and the industry emerges from the economic downturn, we expect to see increased demand for flat-rolled, bar and coated steel products,” Modrowski said. “We intend to bolster our sales and production teams now to expand our customer base as the economy improves.”
Amtex Steel was run by the Spencer family for more than 25 years. “We have great respect for the family and their efforts to build Amtex into a great company,” he said. “They built a solid reputation for their skills in precision shearing, slitting and edging, and we look forward to building on that legacy.”
With this acquisition to build on, “we’re serving notice to the marketplace that we intend to be a serious service center player once again in the Midwest,” Modrowski said.