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Ryerson hires adviser as fund plans proxy battle
Ryerson shares hit $35.37, the highest in at least a decade, a day after CEO Neil Novich said that the company had hired a financial advisor "to assist in further comparing the company's current plan with other strategic alternatives."
Management at New York investment fund manager Harbinger Capital Partners, which with an affiliate owns 9.7% of Ryerson shares, said last month it intended to seek the nomination of seven independent directors to replace the majority of Ryerson's board
The firm said it had grown "increasingly concerned that the board of directors and senior management of the company had not been appropriately vigilant in their management of the company."
Ryerson Shares Rally
Thursday February 15, 2:31 pm ET
Ryerson Shares Jump As Company Plans Strategic Review Amid Shareholder Pressure for Change
NEW YORK (AP) -- Shares of Ryerson Inc. made a comeback Thursday as investors banked on potential changes at the metals distributor, which has locked horns with a dissident shareholder group and is undergoing a review of its business.
The company's stock jumped $3.83, or 12.4 percent, to $34.84, after trading as high as $35.37 earlier -- a new 52-week peak.
On Wednesday, Chicago-based Ryerson reported a $4.4 million loss due to weaker volumes and higher stainless steel prices.
As part of its quarterly report, Ryerson also said it hired UBS as financial adviser to assist in a review of "strategic alternatives." The review comes as an investor group stepped up pressure for change at the company.
UBS analyst Timna Tanners said in a report Thursday that she believes recent shareholder activism eclipses Ryerson's anemic fourth-quarter results. She kept her rating on the company at "Neutral," but raised her price target on the stock to $32 from $28.
"We think potential for business plan or management change will continue to prop the stock," Tanners wrote.
Last month, an investment group with a roughly 10 percent stake in Ryerson launched a campaign to replace a majority of the board and nominate seven independent directors. Private investment firms Harbinger Capital Partners Master Fund I Ltd. and Harbinger Capital Partners Special Situations Fund LP cited the company's underperformance compared with competitors.
Ryerson opposes Harbinger's efforts to make over the board.
Elsewhere Thursday, Goldman Sachs analyst Sal Tharani cut his 2007 earnings estimate after the company' quarterly results fell short of expectations.
"Although we expect improvement in Ryerson's margins over the course of 2007, we believe that it will continue to lag its peers," he said in a client note.
Tharani estimates Ryerson's five-year average operating margin equals less than 2 percent, well below the roughly 5 percent to 9 percent margins rival service centers have achieved.
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