Ipsco Tubulars, a pipe maker that was planning an Initial Public Offering, has instead been sold to Tenaris, which has its head office in Luxembourg, for $1.2 billion.
Ipsco has its head office in NW Houston and is subsidiary of PAO TMK, a Russian company. TMK bought the assets of IPSCO for $1.7 billion through a two-part transaction in 2008 and 2009.
IPO postponed in Feb 2018
Ipsco originally filed for an IPO in January 2018. It had planned to raise $500 million by offering 23.3 million shares at a price range of $20 to $23. That would have valued the company at $1.3 billion. Unfortunately, on the day they were due to price in February 2018, the Dow fell 1,000 points and they postponed the IPO.
In December 2018, they updated their prospectus with the aim of trying again. They hadn’t yet filed revised terms before the announcement by Tenaris.
Acquisition by Tenaris
Tenaris was virtually no presence in Texas until it bought St Louis-based Maverick Tube for $2.4 billion in 2006 and Houston-based Hydril for $2.1 billion the following year.
For the nine months ended September 30, 2018, Ipsco had revenues of $1.1 billion and adjusted EBITDA of $124 million. Both of those numbers are up 50% on the corresponding period in the previous year.
Tariffs and local competition changed the dynamics
The 25% tariffs imposed by President Trump on imported steel enabled Ipsco to raise prices to its customers. Its primary material input for its seamless steel pipe is steel scrap. Prices for scrap were not significantly affected by the tariffs, allowing Ipsco to expand margins. However, the tariffs caused Ipsco to reduce imports sourced from its Russian parent.
Tenaris recently completed a new $1.8 billion pipe mill in Bay City and thus increased its local competition to Ipsco. For these reasons, it appears the parent company decided they were better off selling Ipsco than going through with the IPO.