Beverly Hills-based buyout firm Platinum Equity said Tuesday it had agreed to acquire Ryerson Inc., a Chicago-based steel distributor and processor, for about $1 billion in cash.
For Platinum, known for taking over high-tech companies, Ryerson would be its third steel industry acquisition in less than three years.
The private equity firm, which is led by billionaire Tom Gores, agreed to pay $34.50 a share for Ryerson and to assume about $1 billion in debt.
The purchase price is 15% more than the $30.01 that Ryerson closed at on Feb. 13, the day before the company indicated it would consider takeover bids.
But the deal price is less than the $34.96 that Ryerson shares closed at Monday, suggesting the investors had been expecting more generous terms. Ryerson shares rose as high as $44, their closing price on May 10.
On Tuesday, the stock fell $1.07, or 3%, to $33.89.
One big Ryerson investor, Harbinger Capital Partners, which owns 9.6% of Ryerson's shares, said it was disappointed by the price Platinum would pay.
A spokesman for the New York-based firm, which has nominated a slate of seven directors for election at Ryerson's annual meeting Aug. 23, said it was reviewing its options.
The buyout agreement allows Ryerson to solicit proposals from other parties through Aug. 18. The company said it expected the purchase by Platinum to be completed by the fourth quarter.
Ryerson said it had contacted more than 50 potential buyers and selected Platinum from a number of "internal options and external proposals."
"We think it's a fair deal and in the best interests of our shareholders," said Terry Rogers, Ryerson's treasurer and vice president of finance.
Since its founding in 1995, Platinum has acquired more than 70 companies. It retains 22 of those in its portfolio, with total revenue last year of about $8 billion.
They include PNA Group Inc., a steel processor and distributor with operations in Chicago, Houston and Atlanta, and ESM Group Inc., which sells products and services to the steel industry.
Platinum, whose executives couldn't be reached for comment, emphasizes the value of its operational experience, and Rogers said that background would help Ryerson.
"They bring a lot of operating expertise and capital that allows us to continue to grow the business," he said.
In 2006, Ryerson earned $72 million, or $2.50 a share, on revenue of $5.9 billion.
The Associated Press was used in compiling this report.