Moody's puts Earle M. Jorgensen on developing watch

Moody's Investors Service said it placed the ratings for Earle M. Jorgensen Co. (EMJ) under review with direction uncertain following the announcement that the company and Reliance Steel & Aluminum Co. have entered into a definitive merger agreement.

Reliance will acquire EMJ for over $1 billion: $327 million in Reliance stock, $384 million in cash and the assumption of $291 million of debt at EMJ. Holders of EMJ's B1 $250 million 9¾% senior secured notes are protected by a change of control put.

It has been reported that the cash portion of Reliance's consideration will be financed under Reliance's $600 million syndicated credit facility, Moody's said. As of Sept. 30, Reliance had total debt of $414 million. If the acquisition closes as announced, Reliance's debt would rise to around $1.1 billion and its debt to total capitalization ratio would be around 45%.

Over the 12 months ended Sept. 30, Reliance reported sales and EBITDA of $3.2 billion and $360 million, respectively, and EMJ reported sales and EBITDA of $1.7 billion and $170 million, respectively, the agency said.

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