Moving Metal

Hannah. “We knew Jim Hoffman. We knew Neil McCaffery. We liked all of them and they liked us. It just seemed like a real natural fit.” Finally, in early 2005, Sandy Nelson convinced Kelso that the only way it could sell EMJ was by putting its capital struc- ture in order, and that the best way to do that was through an IPO. After holding EMJ for thirteen years—a long time by private equity standards—Kelso was willing to let Nelson take EMJ public once again. EMJ launched its IPO in April 2005, but the offering came up short, selling just 17.6 million shares instead of 20 million and netting only a disappointing $176 million of the $300 million target. While investors were still concerned about the company’s finances, Dave Hannah was less so. He had originally planned to watch EMJ for two or three quarters, but after only one quarter, he decided that if Reliance did not pull the trigger then someone else might snatch EMJ out of the crosshairs. In the fall of 2005, Hannah called Kelso Managing Partner Frank T. Nickell and said, “Hey, let’s get this deal done.” It took another six months to hammer out the complex stock transaction that was the basis of the deal. McCaffery noticed that Reliance leadership seemed to be unusually con- fident during the negotiations. Dave Hannah, Gregg Mollins, and Karla Lewis typically sat across the table from the EMJ team, and at one point McCaffrey tried to unnerve them. “Well, what about this deal worries you?” he asked. “The size of it? The scope of it? You’ve never done one this big. What exactly are you concerned about at this point?” The Reliance leaders looked at each other and replied, “Nothing.” McCaffery was astounded. “Nothing?” he asked. “No,” they replied. “Well, either you’re really smart or really dumb,” he laughed, “We’ll find out.”

Earle M. Jorgensen, right, with son John W. Jorgensen during the 1980s.

four key EMJ managers for advice. During the next few years EMJ closed underperforming operations, beefed up the money makers, and made much-needed improvements in technology. Still, EMJ’s financial troubles scared away poten- tial acquirers. Reliance watched EMJ with interest all the while. At various points, Bill Gimbel, Joe Crider, and Dave Hannah had all talked to Kelso about potentially buying the company, but they, too, had worried about EMJ’s balance sheet. “The way that Jorgensen was structured was problematic in getting the transaction done,” Hannah recalled. “Their debt was sky high and their capital structure was unattractive.” However, Hannah and Nelson were determined to work out a deal, no matter how long it took. “We knew the Jorgensen people,” said

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