Dan Loeb Boosts "Passive" Stake in Ryerson (RYI) to 7.5%

In a 13G filing on Ryerson Inc. (NYSE: RYI), Dan Loeb's Third Point LLC disclosed a 7.5% stake (1.975 million shares) in the company. The firm showed a 500,000 share stake for the quarter ended December 31, 2006.

Earlier in the week, another hedge fund, Owl Creek, disclosed a 5.3% stake in RYI and said it would support Harbinger's (another activist investor) slate of seven independent directors for nomination to the board.

The 13G indicates a "passive" stake in RYI, but Loeb is best known as a activist investor.

Owl Creek Discloses 5.3% Stake in Ryerson (RYI), Will Support Harbinger's Slate of 7 Independent Directors

In a 13D filing after the close on Ryerson Inc. (NYSE: RYI), Owl Creek disclosed a 5.3% stake (1.39 million shares) in the company and said they are not confident in the current management's ability to improve operating results. The firm also said they believe Harbinger's slate of seven independent directors would add more specific industry experience and be more proactive managers.

From the 'Purpose of the Transaction' section of the filing:

"The Reporting Persons have reviewed the amended Schedule 13D filing by Harbinger Capital Partners on January 2, 2007 and the Issuer's disappointing fourth quarter 2006 results, and have spoken to the senior management team about their short-term and long-term plans for the Issuer, as well as management's thoughts regarding Harbinger's proposals. The Reporting Persons are not confident in current management's ability to improve the operating results of the Issuer given the Issuer's history of underperformance. While the Reporting Persons do appreciate the general business and financial experience that the current Board of Directors possesses, the Reporting Persons believe Harbinger's slate of seven independent directors would add more specific industry experience and be more proactive managers of the Issuer.

Under the shepherding of the current management team and Board of Directors, the Issuer has underperformed its peer group in key operating metrics such as inventory turns, margins, return-on-invested-capital, and share price returns. The Reporting Persons are concerned that the current management team and Board of Directors are not sufficiently proactive in managing the Issuer in an industry with a constantly changing business and operating environment. The Reporting Persons find it peculiar that the current management team specified a number of new initiatives only after Harbinger filed its Schedule 13D. The Reporting Persons do not see evidence of a credible plan to support management's goals of improving underperforming service centers, achieving an inventory turn rate of 5x by the end of 2007, and operating more efficiently. Moreover, if there are actionable ways for the Issuer to achieve these goals, it begs to question why these actions have only been implemented in response to shareholder pressure and have not been implemented sooner since the management team has been in place since 1999."

Harbinger Capital Gets Active with Ryerson (RYI), Citing Board/Management Failures

In a 13D filing after the close on Ryerson Inc. (NYSE: RYI), Harbinger Capital disclosed a 9.7% stake (2.55 million shares) in the company and noted they changed their filing status from 13G to 13D, taking a more active approach with the investment. This is up from the 6.7% stake (1.765 million shares) the firm disclosed in a November 27th 13G filing.

The firm said they have grown increasingly concerned that the board of directors and senior management have not been appropriately vigilant in their management of the company, particularly with respect to its lack of focus on profitability and the management of inventory. The firm said peer companies have been consistently successful in turning inventory.

The firm said it is considering a range of options to encourage better performance, including potential changes in the operations, management, or capital structure as a means of enhancing shareholder value. The firm is also considering nominating one or more persons to the board.

From the "PURPOSE OF TRANSACTION' section of the filing:

The Reporting Person initially reported their investment on a Schedule 13G onNovember 27, 2006. Since that time, the Reporting Persons have examined the financial and operating performance of the Issuer and have grown increasingly concerned that the board of directors and senior management of the Issuer have not been appropriately vigilant in their management of the Issuer, particularly with respect to its lack of focus on profitability and the management of inventory.

The Reporting Persons observe that the Issuer's peer companies have been consistently successful in turning inventory more rapidly than the Issuer and have also consistently earned higher gross, operating and net margins throughout the business cycle. Given this persistent under performance by the Issuer since it was established as a stand-alone enterprise in 1999, the Reporting Persons have concluded that the board of directors has provided insufficient oversight of management's ability to deliver acceptable performance in the key factors that are critical to maximizing the value of the Issuer's existing asset base, geographic presence and product portfolio. The Reporting Persons believe that the current board of directors, while talented and undoubtedly qualified in general business matters, lacks the specific qualifications necessary for understanding the value drivers within the metals processing and distribution business which drive acceptable shareholder returns.

As a result, the Reporting Persons are considering a range of actions by which they may be able to encourage the Issuer to improve its performance. Such activities may include taking a position (including by contacting management and other shareholders of the Issuer) with respect to potential changes in the operations, management, or capital structure of the Issuer as a means of enhancing shareholder value. Such suggestions or positions may include one or more plans or proposals that relate to or would result in any of the actions required to be reported herein. In addition, the Reporting Persons are also considering nominating one or more persons for election to the Issuer's board of directors at the Issuer's next annual meeting of shareholders.