Harbinger Capital Partners Funds Sends Letter to Cleveland-Cliff (CLF) Shareholders

September 19, 2008 3:04 PM EDT

Harbinger Capital Partners Funds, the largest shareholder of Cleveland-Cliffs Inc (NYSE: CLF), today sent the following letter to shareholders of Cleveland-Cliffs:

The October 3rd Cleveland-Cliffs special meeting is rapidly approaching. Once again, we are asking for your support now to authorize our acquisition under the Ohio control share acquisition statute of up to one-third of the voting shares of Cleveland-Cliffs. Please join us as we fight for the future of our shared investment and the interests of all shareholders.

The merger with Alpha Natural Resources is too much, too fast, and shows the urgent need for a strong, independent shareholder advocate that management cannot ignore.

We believe Cleveland-Cliffs is a company with tremendous potential. We do not want to see that potential squandered on a radical, transformative transaction that we believe destroys shareholder value and places the future of your company at substantial risk. According to the company's preliminary proxy statement/prospectus filed August 12, 2008, J.P. Morgan, the company's financial advisor, estimated the value creation per share to Cleveland-Cliffs shareholders in the Alpha transaction at only $1.85, assuming constant discount rates, or less than 1.66% of the company's share price at the time of announcement. The same filing discloses that Citigroup, Alpha's financial advisor, calculated that the transaction would be dilutive to Cleveland-Cliffs earnings per share by between negative 14-19% and negative 13-26% for 2009 and 2010, respectively.

When risk and reward are so out of proportion, shareholders need

someone prepared to say "no" when "no" is the right answer.

Cleveland-Cliffs says it does not want Harbinger to exert control over the company and infringe on the rights of shareholders, yet the company has offered no evidence that Harbinger has ever sought to exert any such control. Indeed, the company acknowledged in its own proxy materials that Harbinger has not presented any demands or proposals to the company. The reality is that, given the range of statutory restrictions that limit our ability to enter into transactions with the company, we believe our greatest opportunity to achieve the most profitable return on our investment is to prompt and prod management toward transactions that benefit all shareholders...

(See CLF for Complete Release)

Related Categories

Mergers and Acquisitions
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Related Entities

• Harbinger Capital
• JPMorgan
• Citi

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