Hedge Fund Casablanca Pushes for Breakup of Iron-Ore Miner.
A hedge fund is pressing for a breakup at Cliffs Natural Resources Inc., CLF +0.36% the company with the worst-performing stock in the S&P 500 index over the past year.
New York hedge fund Casablanca Capital LP wants to see the iron-ore miner divide its international and domestic operations, according to a letter sent Monday to the Cleveland-based company's management that is expected to be disclosed in a securities filing Tuesday morning.
The letter, reviewed by The Wall Street Journal, says Casablanca has been building a position in Cliffs and now owns about 5.2% of the shares outstanding. The two sides have engaged in discussions for more than a month, the letter said.
In a statement, Cliffs called the conversations with Casablanca productive and said it is open to more talks. It added that it has made "significant changes to strengthen its board" and taken steps to improve its financial and operating performance.
"Cliffs will continue to evaluate the strategic fit and value creation potential of all the Company's assets as part of that process," the company said.
Cliffs shares are down about 46% over the past 12 months, versus a 19% rise in the S&P 500. They closed up 0.4% at $19.40 Monday.
With a market capitalization of about $3 billion, Cliffs is also the index's most shorted stock, according to data provider Markit.
Casablanca was started in 2010 by former mergers-and-acquisitions banker Donald Drapkin, along with Douglas Taylor, also a former M&A adviser.
Activists regularly push for corporate breakups. Casablanca executives contend that splitting up Cliffs' international and U.S. operations could help it reverse its fortunes, the letter said.
Very interesting article, might have legs for our SP, if the short positions get nervous---or are the ones that wanted in long cheaper anyway, because they were "in the know". Definitely coming from a source specializing in merger-acquisitions and they also have put their money behind their intent.
WS usually likes rumors and MA. This one appears to be well founded.
I do not think WS was aware of this. Their letter states that they met with CLF twice over six weks to discuss this plan. During this time CLF sank along with all the metal/mining stocks. That drop was not about CLF alone. I have been posting about this for 6 weeks.
Their letter says what this message board was posting about for awhile, and we clearly know that CLF now knows the frustrations that shareholders like us have and they also must know they are in the hot seat pubilcally to finally react and to do something about it.