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Business North - The Daily Briefing - Business Newspaper Online
Cliffs shareholders reject Harbinger bid
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10/3/2008 by Beth Bily |
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Cleveland-Cliffs’ proposed acquisition of Alpha Natural Resources has a far better chance of survival following a preliminary count of a shareholders vote today that rejected a controlling share bid by Harbinger Capital Partners.
Shareholders soundly turned down the proposal by Harbinger, Cliffs’ largest shareholder, to increase its ownership stake from 15.7 percent to up to one-third. In a news release, Cliffs reported that about 80 percent of the shares other than those held by Harbinger were cast against the controlling share bid.
A larger stake in the company would have effectively allowed Harbinger to block Cliffs’ proposed acquisition of Alpha, a Virginia-based supplier of coal to steel, electric utilities and other industries, announced in July of this year. Harbinger, a hedge fund managed by Chisholm, MN native Philip Falcone, opposes the merger as too risky. Two-thirds of Cliffs’ shareholders must vote in favor or the merger for it to move forward.
Cliffs management and its board of directors opposed Harbinger’s controlling share bid. Three leading proxy advisory firms advised shareholders to vote against Harbinger, saying that the controlling share bid offered little gain.
Cliffs’ Chairman Joseph A. Carrabba thanked shareholders for the outcome of today’s vote. “On behalf of Cliffs’ Board and management team, we thank our shareholders for their support. We are pleased Cliffs’ shareholders voted to retain their right to provide meaningful input on the future strategic decisions of the company. Moreover, we are pleased that all shareholders will have the opportunity to evaluate the merits of the proposed acquisition of Alpha Natural Resources.”
Harbinger released a statement saying the company was “disappointed” with the outcome, but denied the move was an effort to control the company. Harbinger also expressed some confidence that blocking the merger was still a possibility. “In the process of soliciting proxies for today’s vote, we have found widespread agreement among the company’s shareholders that the proposed acquisition of Alpha Natural Resources represents a profound strategic mistake, which places the future of the company at substantial risk.”
The merger vote is expected to take place later this year.
Meanwhile, the uncertainty and declining markets have taken their toll on Cliffs shares and sent the proposed cash and stock acquisition value downward from $10 billion in July to a current $4 billion, according to the Associated Press.
Stocks affected by the pending merger rallied today on news of the shareholder’s controlling share bid rejection. At 1 p.m., Alpha’s stock had jumped to $45.21, a nearly 12 percent gain and Cliffs shares were trading at $41.52, up about 10 percent.
Cliffs is North America’s No. 1 iron ore producer and owns a 23 percent share of Hibbing Taconite, 100 percent of Northshore Mining in Babbitt-Silver Bay and 100 percent of United Taconite in Eveleth-Forbes, all in Northeastern Minnesota. Those operations employed 1,689 FTEs in mid-2008.
Cliffs also has an 85 percent ownership share in the Tilden Mine and a 79 percent share of the Empire Mine, both in Michigan’s Upper Peninsula. The two operations employed 1,431 FTEs at Dec. 31, 2007.
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