LOS ANGELES — One of the oldest service center chains in the country might be in play as A.M. Castle & Co. has adopted a shareholder rights plan in an apparent move to fend off a possible takeover attempt by private investment firm Platinum Equity LLC.
The rights plan is designed to reduce the likelihood of a "coercive takeover," the Oak Brook, Ill.-based company said. Often referred to as "poison pills," these plans are widely viewed as designed to discourage outside takeovers.
Platinum Equity disclosed in an August filing with the U.S. Securities and Exchange Commission that it had purchased 6.05 percent of A.M. Castle’s shares. The Los Angeles-based private equity firm, run by private investor Tom Gores, is already the controlling shareholder in Chicago-based distribution chain Ryerson Inc., through which A.M. Castle’s shares were purchased.
Platinum Equity said in the SEC document that its intention was "to engage in discussions" with A.M. Castle and discuss "strategic alternatives" that could potentially include an acquisition of the chain.
A.M. Castle’s rights plan will enable its shareholders to "realize the long-term value" of the company by "safeguarding" the board’s ability to take actions that will create value for shareholders, it said. The company is issuing one preferred stock purchase right for each share of common stock outstanding on Sept. 11, which could be exercised if an outsider acquires 10 percent of its common stock or announces a tender offer that would result in 10-percent ownership.
A spokesman for Platinum Equity declined to comment.
A.M. Castle’s announcement didn’t appear to dampen takeover speculation. The company’s common stock on the New York Stock Exchange increased 9.3 percent Friday to $13.03 per share.
Platinum Equity’s ownership of service centers hasn’t been limited to Ryerson. In 2008, near the peak of the steel market, it sold Atlanta-based PNA Group Holding Corp. to the largest U.S. service center, Reliance Steel & Aluminum Co., Los Angeles, for $1.1 billion.
A.M. Castle, founded in 1890, posted a second-quarter net loss of nearly $3 million vs. net income of $3.7 million in the year-ago quarter despite a 16.6-percent rise in sales to $329.4 million. It blamed the loss on adjustments related to financial instruments, including commodity hedging, and costs associated to the departure of its former president and chief executive officer, Michael H. Goldberg, who resigned in May.