Cleveland-Cliffs Rejects Harbinger Control Share; Where Does That Leave ANR?

Cleveland-Cliffs Inc (CLF) shareholders rejected Harbinger Capital's control share acquisition on October 3, 2008. A CLF press releases states the following:

[B]ased on the preliminary count provided by its proxy solicitor, it appears that approximately 80% of shares voted by holders other than Harbinger Capital Partners, its equity-swap counter parties or other 'interested' shareholders voted AGAINST the proposed control share acquisition at today's special meeting.

While this event certainly marks a positive development in general for this transaction, the fact that 20% of CLF shareholders failed to reject Harbinger's initiative very much leaves the outcome of the Alpha Natural Resources, Inc. (ANR) deal in doubt. With Harbinger's approximate 15%+ interest in CLF, there is currently a potential combined 35% of CLF shareholder ownership opposed to the merger which, under Ohio statutes, is sufficient to reject the merger transaction.

Thus, CLF must now focus entirely on convincing a significant portion of the 20% from Friday's meeting to support the ANR deal. At this point, momentum must be perceived as being on CLF's side with the Harbinger rejection. However, the company has been less than impressive so far in making its case for the merger and if this trend continues under the current circumstances (CLF's market value and the market in general) this deal must still be considered in danger of failing.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.

Comments

[john redmond:]

This action is a prime example why laws must be passed in the future to prevent funds of all stripes from buying more than a 10% share of any one company. This is a disturbing trend with funds making decisions for companys that may have long term consequences while the funds are only concerned with short term profits. Haven't hedge funds done enough harm to the orderly market process.

2008 Oct 07 11:20 AM