MRC Global Announces Sale of Canada Business
Rhea-AI Summary
MRC Global (NYSE: MRC) announced the sale of its Canada operations to Emco The strategic divestiture aims to focus on core geographies and product offerings with stronger growth and profit potential. The sale is expected to be accretive to the company's adjusted gross margins and adjusted EBITDA margins.
The transaction will result in a pre-tax, non-cash loss on discontinued operations of approximately US $25 million in Q4 2024. The deal is expected to close in H1 2025, subject to Canadian regulatory approval. MRC Global plans to use the proceeds for debt reduction. CIBC served as financial advisor, with Norton Rose Fulbright and McCarthy Tétrault LLP providing legal counsel.
Positive
- Strategic refocus on core markets with higher growth potential
- Expected improvement in adjusted gross margins and EBITDA margins
- Proceeds will be used to reduce debt leverage
Negative
- US $25 million pre-tax non-cash loss expected in Q4 2024
- Loss of Canadian market presence and associated revenue stream
- Transaction subject to regulatory approval, creating closing uncertainty
Insights
This strategic divestiture represents a significant pivot for MRC Global, streamlining operations to focus on core markets. The sale, while resulting in a
The Canadian operations likely represented a smaller, less profitable segment compared to MRC's core markets. By divesting this unit, management can redirect capital and resources to higher-growth, higher-margin opportunities. The involvement of CIBC as financial advisor and reputable legal firms suggests a well-structured deal that should provide clean execution and minimal operational disruption during the transition period.
This divestiture aligns with broader industry trends where industrial distributors are optimizing their geographical footprints to enhance operational efficiency. The sale to Emco , a well-established Canadian distributor, suggests a strategic fit that should facilitate a smooth transition for existing customers and employees. The timing of this announcement, amid challenging market conditions, indicates MRC's proactive approach to portfolio optimization.
The expected margin improvements post-divestiture suggest the Canadian operations were potentially dilutive to overall company margins. This strategic repositioning should allow MRC to better compete in its remaining core markets and potentially drive higher shareholder value through improved profitability metrics.
HOUSTON, Dec. 16, 2024 (GLOBE NEWSWIRE) -- MRC Global Inc. (NYSE: MRC), announced today that its subsidiary, MRC Global (Canada) ULC, has entered into a definitive agreement to sell its Canada operations to Emco Corporation.
Rob Saltiel, MRC Global President & CEO stated, “This divestiture will reposition our strategic focus and future capital investment decisions on our core geographies and product offerings that provide the strongest growth and profit potential. The sale of our Canada business is expected to be accretive to our total company adjusted gross margins and adjusted EBITDA margins.
“I would like to express my appreciation to our Canada team members who have consistently provided exceptional value to our customers. We believe we have found the right home for the Canada business and that Emco Corporation is well equipped to maintain success for our employees and customers into the future," Mr. Saltiel added.
As a result of the expected sale, a pre-tax, non-cash loss on discontinued operations of approximately US
Canadian Imperial Bank of Commerce (CIBC) acted as financial advisor to MRC Global. Norton Rose Fulbright acted as legal counsel to MRC Global; and McCarthy Tétrault LLP acted as legal advisor to Emco.
About MRC Global Inc.
Headquartered in Houston, Texas, MRC Global (NYSE: MRC) is the leading global distributor of pipe, valves, fittings (PVF) and other infrastructure products and services to diversified end-markets including the gas utilities, downstream, industrial and energy transition, and production and transmission sectors. With over 100 years of experience, MRC Global has provided customers with innovative supply chain solutions, technical product expertise and a robust digital platform from a worldwide network of over 200 locations including valve and engineering centers. The company’s unmatched quality assurance program offers over 300,000 SKUs from over 8,500 suppliers, simplifying the supply chain for approximately 10,000 customers. Find out more at www.mrcglobal.com.
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Words such as “will,” “expect,” “expected,” and similar expressions are intended to identify forward-looking statements.
Statements about the company’s business, including the company’s expectations that the transactions described in this release as being accretive to both cash generation and earnings per share in 2025 and beyond, are not guarantees of future performance. These statements are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, most of which are difficult to predict and many of which are beyond MRC Global’s control, including the factors described in the company’s SEC filings that may cause the company’s actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements.
These risks and uncertainties include (among others) decreases in capital and other expenditure levels in the industries that the company serves; U.S. and international general economic conditions; geopolitical events; decreases in oil and natural gas prices; unexpected supply shortages; loss of third-party transportation providers; cost increases by the company’s suppliers and transportation providers; increases in steel prices, which the company may be unable to pass along to its customers which could significantly lower the company’s profit; the company’s lack of long-term contracts with most of its suppliers; suppliers’ price reductions of products that the company sells, which could cause the value of its inventory to decline; decreases in steel prices, which could significantly lower the company’s profit; a decline in demand for certain of the products the company distributes if tariffs and duties on these products are imposed or lifted; holding more inventory than can be sold in a commercial time frame; significant substitution of renewables and low-carbon fuels for oil and gas, impacting demand for the company’s products; risks related to adverse weather events or natural disasters; environmental, health and safety laws and regulations and the interpretation or implementation thereof; changes in the company’s customer and product mix; the risk that manufacturers of the products that the company distributes will sell a substantial amount of goods directly to end users in the industry sectors that the company serves; failure to operate the company’s business in an efficient or optimized manner; the company’s ability to compete successfully with other companies; the company’s lack of long-term contracts with many of its customers and the company’s lack of contracts with customers that require minimum purchase volumes; inability to attract and retain employees or the potential loss of key personnel; adverse health events, such as a pandemic; interruption in the proper functioning of the company’s information systems; the occurrence of cybersecurity incidents; risks related to the company’s customers’ creditworthiness; the success of acquisition strategies; the potential adverse effects associated with integrating acquisitions and whether these acquisitions will yield their intended benefits; impairment of the company’s goodwill or other intangible assets; adverse changes in political or economic conditions in the countries in which the company operates; the company’s significant indebtedness; the dependence on the company’s subsidiaries for cash to meet parent company obligations; changes in the company’s credit profile; potential inability to obtain necessary capital; the sufficiency of the company’s insurance policies to cover losses, including liabilities arising from litigation; product liability claims against the company; pending or future asbestos-related claims against the company; exposure to U.S. and international laws and regulations, regulating corruption, limiting imports or exports or imposing economic sanctions; risks relating to ongoing evaluations of internal controls required by Section 404 of the Sarbanes-Oxley Act; risks related to changing laws and regulations including trade policies and tariffs; and the potential share price volatility and costs incurred in response to any shareholder activism campaigns.
For a discussion of key risk factors, please see the risk factors disclosed in the company’s SEC filings, which are available on the SEC’s website at www.sec.gov and on the company’s website, www.mrcglobal.com. MRC Global’s filings and other important information are also available on the Investors page of the company’s website at www.mrcglobal.com.
Undue reliance should not be placed on the company’s forward-looking statements. Although forward-looking statements reflect the company’s good faith beliefs, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the company’s actual results, performance or achievements or future events to differ materially from anticipated future results, performance or achievements or future events expressed or implied by such forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except to the extent required by law.
Contact:
Monica Broughton
VP, Investor Relations & Treasury
MRC Global Inc.
Monica.Broughton@mrcglobal.com
832-308-2847
FAQ
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