NEWS TRIBUNE
Debate between Cleveland-Cliffs Inc. and its largest shareholder heated up Friday, following the filing of a proxy statement laying out concerns about the company's plans to acquire Alpha Natural Resources Inc. at a cost of about $ 10 billion.
Harbinger Capital Partners, owner of 15.6 percent of Cleveland-Cliff's outstanding stock, opposes the deal, which would thrust the nation's largest producer of taconite pellets deep into the coal business. Alpha, based in Abingdon, Va., is the nation's largest supplier of Appalachian coal to the steel industry.
In a filing with the Securities and Exchange Commission Friday, Harbinger laid out its position, saying: "We at Harbinger recognize the value in taking risks, but the $10 billion acquisition of Alpha is too much, too fast."
Harbinger goes on to argue that the acquisition could harm Cleveland-Cliffs' value, as the cost of buying Alpha isn't sufficiently offset by the promise of increased earnings in the future.
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Cleveland-Cliffs was quick to respond with its own 31-page SEC filing Friday, submitting Form 425 which made a case in support of the Alpha deal. That report said the acquisition would help diversify the company and give it increased exposure to export markets. It also said synergies between Alpha and Cleveland-Cliffs are expected to result in annual savings of at least $200 million beginning in 2010.
In an effort to block the acquisition, Harbinger is seeking shareholder authorization to boost its equity position in Cleveland-Cliffs, possibly snapping up as much as one-third of the company's outstanding stock.
Cleveland-Cliffs has scheduled an Oct. 3 vote on the proposed Alpha deal and must obtain the support of investors controlling at least two-thirds of outstanding stock in order to complete the acquisition.
Cleveland-Cliffs' board of directors unanimously recommended shareholders support the purchase of Alpha and resist Harbinger Capital's overtures for authority to purchase a larger block of stock in the company. Cleveland-Cliffs warned: "Shareholders could be prevented from participating in any future strategic transactions involving Cliffs, including a sale of Cliffs or a significant part of its assets or capital stock, as well as acquisitions or mergers requiring shareholder approval, if Harbinger opposes such a transaction."
Harbinger's manager, Phil Falcone, has publicly discussed the potential shareholder advantages of exploring the outright sale of Cleveland-Cliffs to a third-party buyer.
Cleveland-Cliffs operates three Iron Range mines: Northshore Mining Co., United Taconite Co. and Hibbing Taconite Co.
