Swing Trading Strategies & Stock Picks Since 2003

Wow, you know you are disconnected from following individual stock news when an event like this passes beneath your radar. Alpha was one of our largest holdings and biggest money makers in the short time we held it in 2008. Cleveland Cliffs went so far as to change its name to Cleveland Natural Resources in anticipation of this deal. (I guess they get to keep that new letterhead now!) It's been such a waste of time to focus on individual fundamentals the past 3 months that the news flow has been immaterial.

We like to find big "events" that signal sector tops, and have been quite good at catching them but in our bullishness for commodities missed the signs that this merger basically called the top in commodities. And so ends one of the more bizarre proposed mergers to (not) go down; the spread between the stock prices of the two names in relation to their original agreement has been so wide for so long, one could assume there was a very good chance this deal would never go through... those "in the know" apparently knew within hours that Harbinger was opposed to the deal while the rest of us scratched our head after the initial pop why the stocks were not acting as if the merger would happen. This situation also marked one of the turning points in the growing power of hedge funds to interfere with actual business decisions by company managements.
[Aug 22: Bloomberg: Cleveland Cliffs Asks Shareholders to Block Harbinger]
[Aug 15: Harbinger Seeks to Raise Stake in Cleveland Cliffs]
[Jul 31: FT.com - Mittal (MT) Considering Bid for Alpha Natural Resources]
[Jul 25: More Drama at the Cleveland Cliffs Corral]
[Jul 16: Thoughts on Cleveland Cliffs (CLF), Alpha Natural Resources (ANR) Deal]
I still like both these companies as independent entities but we've been out of them for a long while in the great gutting of commodities, circa 2nd half 2008. We'll be back probably in the back half of 09 when commodities might be cool again. (although they are overdue for an oversold bounce)

• Cliffs Natural Resources' proposed $2.7 billion takeover of coal producer Alpha Natural Resources has been called off, the companies said Monday.
• Terminating the deal is in the best interest of shareholders due to the faltering U.S. economy, uncertainty in the steel industry and other factors, the companies said in a joint news release. Cliffs agreed to pay Alpha a $70 million breakup fee. In turn, Alpha agreed to drop a lawsuit filed against Cliffs for unilaterally delaying a shareholder vote on the proposed acquisition.
• Alpha spokesman Ted Pile said the deal never overcame opposition from hedge fund Harbinger Capital Partners. A spokesman for the Birmingham, Ala.-based firm, which owns almost 15 percent of Cliffs, did not immediately return a call seeking comment. "There isn't any underlying issues with the two companies," Pile said. "The main reason is one shareholder that opposed the deal and would not move off his position.
• Harbinger came out against the deal just days after it was announced last July, then sought shareholder approval to acquire up to a third of Cleveland-based Cliffs' shares -- enough to kill the deal. Harbinger, which labeled the Alpha acquisition too risky, failed to win approval to buy the shares last month.
• The deal also ran into economic reality. Supplying steel plants with coking coal to fire blast furnaces was a big factor in Cleveland-based Cliffs' decision to acquire Alpha last summer. Abingdon, Va.-based Alpha bills itself as the largest U.S. producer and exporter of coking coal. Cliffs operates primarily iron ore mines in Michigan, Minnesota, Canada and Australia, but last year branched out by acquiring three coal mines with high coking production in West Virginia and Alabama.
• Global financial turmoil has since hit steel producers hard. Plummeting demand has cut prices about 50 percent from all-time highs reached earlier this year and prompted production cuts by ArcelorMittal and other big international producers.
• The value of the cash-and-stock deal, which was once valued at nearly $10 billion, also has plunged over the past four months along with shares of both companies.