Kelso to Buy 2 Southland Metal Products Firms : Metals: The New York merchant banker strikes a deal with Earle M. Jorgensen Co. and Kilsby-Roberts.
New York merchant banker Kelso & Co. will acquire and merge two independent distributors of metal products--the Lynwood-based Earle M. Jorgensen Co. and the Brea-based Kilsby-Roberts Holdings Inc.--under an agreement announced Tuesday.
Kelso, which already owns about 5% of privately held Kilsby-Roberts, will pay $75 million for the remainder of Kilsby-Roberts and $261 million--$41.50 per share--for Jorgensen. In addition, Kelso will assume debt of both companies and will cover additional costs of executive stock options, said Michael Gordon, a managing director of Kelso.
Jorgensen shareholders will be paid in cash. The company’s stock rose $9.50, closing at $40, in trading on the New York Stock Exchange on Tuesday.
The deal is a corporate milestone for the Jorgensen firm, whose namesake and chairman has gained notoriety for his longstanding friendship with former President Ronald Reagan. Earle M. Jorgensen, 91, founded the firm in 1921 and carved a commercial niche by processing and distributing metal to producers of oil drilling equipment.
The firm now grinds and cuts steel and aluminum and delivers its products to a wide range of manufacturers. It is the nation’s fifth-largest distributor of metal products. The company had earnings of $9 million on sales of about $474 million in 1988, compared to net income of $9 million and revenue of $341.4 million in 1987.
Kilsby-Roberts, with estimated annual revenue of about $300 million, is a leading distributor of metal tubing and pipe products.
Jorgensen is to become chairman of the newly merged company pending completion of a tender offer for Jorgensen Co. shares. The 30-day offer will be made on Monday.
Neven Hulsey, chairman and chief executive of Kilsby-Roberts, is to be named president and chief executive of the new company, Kelso’s Gordon said.
Gordon said the merged firm would be balanced and shielded from industry crashes because Jorgensen and Kilsby-Roberts have distinctly different metal product lines.
“We have an opportunity to build a very significant company in this industry,” Gordon said. “There would be savings in overhead and administration. They have complementary lines.”
The two companies will be maintained under their current names and will operate as separate divisions under a parent corporation to be called Earle M. Jorgensen Holdings Co.
The merged firm would become the largest independent distributor of metal products in the nation and would rank second only to a subsidiary of Inland Steel in overall sales.
Jorgensen, which has plants in Lynwood and Oakland, has 2,100 employees and operations throughout the country. Kilsby-Roberts’ California operations are located in the City of Industry and Hayward. The Brea firm and a subsidiary employ nearly 1,000.
The prospective new owner of the two firms does not plan any layoffs or plant closings.
Gordon said the managers and employees at Jorgensen and Kilsby-Roberts would be given the option of acquiring 20% to 30% of the equity in the merged company through an employee stock ownership plan. But an ESOP would not be used to finance the acquisition, he said. Kelso already has financing commitments, he said.
