CHICAGO — A.M. Castle & Co.’s board of directors has successfully fended off a possible takeover by rival Ryerson Inc. and Platinum Equity LLC, Ryerson’s largest shareholder.
Platinum Equity LLC filed a Schedule 13D form with the Securities and Exchange Commission on Aug. 20 disclosing that the Los Angeles-based investment firm, a number of its funds and Chicago-based Ryerson jointly owned nearly 1.4 million shares of Castle’s common stock – more than 6 percent of its outstanding shares—valued at $17.4 million.
They acquired the shares with the intent of entering discussions with Oak Brook, Ill.-based Castle "concerning (its) business and operations, a possible acquisition and/or strategic alternatives," according to the filing.
During Castle’s quarterly conference call Thursday, chairman Brian P. Anderson said the board met with Ryerson’s representatives to "discuss their interest in acquiring Castle."
But after Anderson and Castle’s financial advisor met with Ryerson and Platinum, and the board evaluated their offer as well as alternatives to a sale, directors determined that it was in the best interest of shareholders to continue running the company "as a standalone entity under the leadership of Scott Dolan," Anderson said.
Dolan was appointed president and chief executive officer Oct. 15 (amm.com, Oct. 16), succeeding Michael H. Goldberg, who resigned in July following a string of financial losses.
"The board is wholly committed to building longer-term shareholder value," Anderson said, adding that it views the long-term direction of the company "extremely positively."
He suggested that Dolan’s experience turning around struggling units for General Electric Co. and United Airlines, combined with his energy and customer skills, were strong reasons for Castle to continue as an independent company.
During the conference call, Dolan promised a strategic review of Castle’s operations over the next 90 days to align them more closely and develop process and other improvements.
A Platinum Equity executive referred questions to Ryerson, whose executives couldn’t be reached for comment Thursday.
A steel distributor who closely observes the industry said the merger wouldn’t have meant much in the flat-rolled market but would have added specialty products customers and expertise to Ryerson’s stable.
As a full-line supplier, "it would have made them incredibly competitive with many other Chicago service centers and those who want to come into the Chicago market," he said. On the other hand, "large service centers getting bigger isn’t necessarily better. When you’re that big, there are fewer synergies to get rid of and little that you can do to improve a poorer-performing partner." Plus, "I don’t see them as having huge compatibility."
He noted that if Castle fails to boost profits down the line, even under new energetic leadership, "Ryerson could get them very cheap."