Cleveland Cliffs vs. Harbinger: Will the Hedgies Win?

The saga continues - it appears clear that Cleveland Cliffs (CLF) management wants to acquire Alpha Natural Resources (ANR) for business purposes and it appears clear Harbinger does not want it to happen for their investment purposes. The crossroads between hedge funds and business continues to fascinate - I expect hedge funds to wield more and more power in the coming decade and this to become commonplace as larger hedge funds attract more and more assets. And money = power. This opens up a lot more questions about how corporations will be run in the future - and for whom and with what time frame will decisions be made. A hedge fund can force a decision and then be "gone" in 3 months, 3 quarters, or 3 years and leave the actual business to deal with the mess or lost opportunity later.

• Cleveland-Cliffs Inc., North America's largest iron-ore producer, asked shareholders to block Harbinger Capital Partners' plan to buy as much as one-third of the company after meeting with fund director Philip Falcone.
• Cleveland-Cliffs ``unanimously recommends'' shareholders vote against allowing the hedge fund to increase its stake from 16 percent, the company said today in a regulatory filing. The company will ask shareholders to vote on the proposal on Oct. 3 at a meeting in South Euclid, Ohio.
• Harbinger opposes Cleveland-Cliffs' plan to buy coal miner Alpha Natural Resources Inc., saying it isn't in shareholders' interests. Letting the fund boost its stake would give Harbinger ``disproportional influence and control over corporate policy and Cleveland-Cliffs' strategic plan,'' the iron-ore company said.
• Under Ohio law, Cleveland-Cliffs needs to secure support from two-thirds of its shareholders to complete the acquisition of Alpha Natural Resources, which would more than double its output of metallurgical coal. Failure to win approval would require the Cleveland-based miner to pay Alpha a breakup fee of $100 million.
• Cleveland-Cliffs Chief Executive Joseph Carrabba spoke with Clark on July 15 to inform him that the company was about to announce the proposed acquisition of Alpha, the miner said in the filing. Clark said he would be looking for more information about the transaction and gave ``no indication'' that Harbinger would oppose the transaction, Cleveland-Cliffs said.
• Falcone wants Cliffs to consider putting itself up for sale and says the company could be worth more than $130 a share, the Wall Street Journal reported July 27.

Fast money (hedge fund) vs slow money (building a business). Fascinating.

Disclosure: Long both names in fund; long Alpha Natural Resources in personal account

Comments

[pachanguero:]

Another fine piece buy TM. This is a 09 story that will rock the mining world. CLF and ANR =$$$$$

2008 Aug 24 08:42 AM

[JJTERRITO:]

The current situation fully reflects the ongoing problem facing management ,stockholders and the regulatory bodies.Hedge Funds have one objective,maximize profits.In my opinion they have advantages which the average investor does not possess-huge amounts of capital-which can be used to achieve their objectives.Naked short selling is just one of the tools in their arsenal,they also trade on multiple markets for opacity.Hedge Funds should be subjected to the same rules as retail customers and be required to trade strictly during trading hours of the U.S.markets.In addition,if their holdings exceed 9% a notice of their intentions should be made public prior to execution.

2008 Aug 24 03:17 PM

[Coalman:]

"Cleveland-Cliffs Chief Executive Joseph Carrabba spoke with Clark on July 15 to inform him that the company was about to announce the proposed acquisition of Alpha" ? Who is "Clark" ? I was thinking he met with Falcone. Anyway, the Oct 3rd vote can't come soon enough as this cloud of uncertainty is not good for ANR or CLF investors.

2008 Aug 25 12:58 PM

[who:]

can anyone shed some light as to the reasons for the 60% drop (since this article came out) in share price? global slow down can't possible explain the sudden drop from $100 to $40...what next $30?

with earnings soon, can we expect an explosion down or up?

2008 Oct 02 10:52 AM