Harbinger & Cleveland-Cliffs

Cleveland-Cliffs Inc., an iron ore and processing company, is opposing a hedge fund's efforts to increase its stake.

Under the law of the state of incorporation, Ohio, the hedge fund, Harbinger Capital, needs shareholder approval to acquire more than 20% of the company. Harbinger now has about 15.57% thereof, and says it wants to own more than the 20% threshold, but less than one third.

The reason for its interest in upping its stake? Harbinger believes that Cleveland-Cliffs is making a counter-productive strategic decision in buying Alpha Natural Resources, and it wants to be in a position to oppose that purchase effectively. The ALpha deal will require a two-thirds vote of shareholders in the acquiring company for approval, so by buying up to 1/3, Harbinger will make this very easy for itself.

Shareholders of record as of Sept. 2 will be able to vote at the meeting on Oct. 3, Cleveland-Cliffs said.

In its proxy materials asking its shareholders to vote against Harbinger's request, Cleveland-Cliffs unsurprisingly reiterated its view of the merits of the Alpha deal. It also said that the issue goes beyond that: Harbinger would acquire a veto on any other analogous transactions.