harbinger seeks stake in cleveland cliffs

Harbinger seeks to raise stake in Cleveland-Cliffs

Reuters, Thursday August 14 2008 (Adds investor comment)

NEW YORK, Aug 14 (Reuters) - Hedge fund Harbinger Capital Partners said on Thursday it is seeking approval from Cleveland Cliffs Inc's shareholders to boost its ownership stake to as much as a third of the iron-ore company.
Harbinger -- already Cleveland-Cliffs' largest shareholder -- opposes Cleveland Cliffs' proposed takeover of Alpha Natural Resources, saying it believes the Alpha deal is not in the best interest of shareholders.
The fund said in a regulatory filing that it has asked Cliffs for a shareholder vote that would allow Harbinger to acquire shares that would bring its ownership up to more than one-fifth, but less than one-third, of Cliffs' outstanding shares.
Harbinger currently controls about 15.57 percent of Cliffs' shares.
"They're trying to block the deal. I don't think there's any other way you can read this," said Kirk Schmitt, portfolio manager at Victory Capital Management, which holds about 320,000 shares of Cliffs. "And as you saw today, that was viewed positively by the market."
Cliffs' shares closed up 3.5 percent at $96.99 on the New York Stock Exchange Thursday.
Cleveland-Cliffs needs two-thirds approval from shareholders to push the Alpha deal through, so any increase in Harbinger's stake would make closing the purchase less realistic.
Still, Ohio law also says Harbinger needs shareholder approval in order to increase its stake above 20 percent, according to research firm FactSet SharkRepellent. It has filed with regulators to set up that vote.
Other than the Ohio statute, Cliffs has weak takeover defenses, FactSet SharkRepellent said. It has no "poison pill" shareholder rights plan and doesn't hold staggered elections of its directors.
Cleveland-Cliffs said on July 16 it would buy coal miner Alpha Natural Resources. The deal is currently valued at about $8.1 billion.
Harbinger wants Cliffs to consider all options that would maximize shareholder value, including a sale, recapitalization or an alternative transaction.
That could happen if the Alpha deal falls apart, said Victory Capital Management's Schmitt.
"If this deal gets voted down, I think the company would definitely be in play," he said. (Reporting by Michael Erman and Euan Rocha, Additional reporting by Jessica Hall in Philadelphia, editing by Maureen Bavdek, Phil Berlowitz)