October 8, 2008

Mining Company Snubs Harbinger / Cleveland-Cliffs Investors Reject Plan to Buy Up Shares; Bid for Alpha Natural Still On

A hedge fund lost the fight to double its holdings in Cleveland- Cliffs yesterday, a move that would have allowed it to block a $4 billion buyout of Alpha Natural Resources. Shareholders of Cleveland-Cliffs, an iron ore miner, voted against the request by Harbinger Capital Partners to buy up to a third of the company's shares. Harbinger needed shareholder backing under state law.

Harbinger owns about 16.6 million shares, or 15.57 percent, of the Cleveland-based company.

Harbinger believes the Alpha Natural Resources deal is risky.

Cleveland-Cliffs announced its bid for Abingdon-based Alpha Natural on July 16. Under the deal, Alpha shareholders would get 0.95 Cleveland-Cliffs shares and $22.23 in cash for each share.

The value of the deal has plummeted from $10 billion, when it announced in July, to about $4 billion as Cleveland-Cliffs' stock has deteriorated. Cleveland-Cliffs shares have lost two-thirds of their value as commodity prices have fallen away in the past two months.

Cleveland-Cliffs Co. shares rose slightly to $38.27. Alpha Natural shares rose 4.3 percent, or $1.75, to $42.25.

Cleveland-Cliffs spokesman Steve Baisden acknowledged that shareholder approval of the Alpha Natural deal is not a sure thing, given Harbinger's continued opposition and the two-thirds shareholder support needed for approval.

Baisden said a shareholder vote on the deal probably will be scheduled for the first half of November and, if approved, the deal should close by the end of the year.

Harbinger said in a statement yesterday that it was not its intent to gain control of the company. Harbinger continues to oppose the deal, saying it "represents a profound strategic mistake which places the future of the company at substantial risk."

Alpha Natural operates 60 mines in West Virginia, Virginia, Kentucky and Pennsylvania.

In a regulatory filing last month, Harbinger said coal mining poses greater risks than open-pit iron mining.

The proposed company, to be called Cliffs Natural Resources, would have 8,900 workers and expected 2009 revenue of $10 billion. Cliffs Natural Resources would have a reserve base of about 1 billion tons of iron ore and 1 billion tons of metallurgical and steam coal.

If the deal closes, Alpha Natural stockholders would own about 40 percent of the combined company, and Cleveland-Cliffs shareholders would own 60 percent.

Originally published by The Associated Press.

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