A Preemptive Price Reduction

We now have a second take-private buyout whose price was reduced due to credit market woes. Actually, it seems to have been the first one.

More than a month before Home Depot Supply became a business page soap opera, Platinum Equity cut its offer for metal processor Ryerson Inc. (NYSE: RYI) from $37.50 per share to $34.50 per share. The move took about $80 million off the top, and was first disclosed yesterday in proxy materials filed with the SEC.

The filing reports that Ryerson originally received three bids on June 11, ranging from $30 per share to Platinum’s high offer of $37.50 per share plus a warrant. Platinum later that it would need to receive new Ryerson financials to “reconfirm” its bid, and on July 14 submitted a revised offer of $35.50 per share – minus the warrant, but plus a go-shop provision. This was still the best bid, and all seemed like a go (save for some failed opposition by dissident Ryerson shareholder Harbinger Capital, which yesterday sold its 9.6% stake).

But just four days later, Platinum told Ryerson banker UBS that it had not yet received its debt financing commitments, and that its “financing sources had expressed concern about the tender offer structure and the deteriorating state of the debt markets.” One day later, Platinum “informed UBS that it was reducing its offered price per share by $1.00 to $34.50 per share stemming from a significant increase in its debt financing costs and the equity funding requirements imposed by its debt financing sources due to continued deterioration in the debt markets.”

UBS attempted to renegotiate with Platinum on July 23, but the private equity firm would not budge. The final deal was announced at $34.50 per share, on the morning of July 24.