Cleveland Cliffs vs. Harbinger: Will the Hedgies Win?

Includes: ANRZQ, CLF
by: TraderMark

The saga continues - it appears clear that Cleveland Cliffs (NYSE: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