Platinum Equity likely to ally with Tata Ryerson

Tata Steel is likely to have Platinum Equity, a leading private equity firm, as its equal partner in Tata Ryerson, the steel processing company.

Ryerson today announced that it had entered into a definitive merger agreement to be acquired by Platinum, in a transaction valued at approximately at $2 billion. According to the terms of the agreement, an affiliate of Platinum Equity would acquire all the outstanding shares of Ryerson common and convertible preferred stock for $34.50 a share in cash.

Ryerson's board of directors has unanimously approved the merger agreement and has recommended the offer to shareholders.

Sources close to the development said the move implied that Platinum Equity would become a natural partner in Tata Ryerson, the 50:50 joint venture between Tata Steel and Ryerson Inc.

Tata Ryerson has been on a growth path. The company is setting up units in Pune, Chennai, Pantnagar and Singur. While Singur would cater to Tata Motors' small car project, Chennai would be for heavy vehicles to service customers such as Caterpillar, BEML, Komatsu, among others.

The merger agreement between Ryerson and Platinum permits Ryerson to solicit superior proposals from other parties till August 18, 2007.

A Tata Steel spokesperson refused to comment on whether Tata Steel would look at acquiring 100 per cent in Tata Ryerson.

He said, "We have no comments to offer on the Ryerson development."

However, Ryerson has also said that there can be no assurances that the solicitation of proposals will result in an alternative transaction. Sources said Tata Steel had no plans at the moment to bid for Ryerson.

The transaction is subject to shareholders' approval and is expected to be completed by the fourth quarter of 2007.

Ryerson put the company on the block early this year after Alabama-based Harbinger Capital Partners, one of the major shareholders, offered to replace its own directors. Harbinger said Ryerson's performance in the last few years was behind its competitors'. It has been one of the lowest operating profit margins among its peers.

However, the current management of Ryerson is likely to be retained. Jacob Kotzubei, the Platinum executive leading the transaction, said the firm was looking forward to working with the entire team at Ryerson as well as its customers and vendors to create additional value.