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Alpha Natural Resources takes Cliffs to court over delay in takeover vote


Cliffs Natural Resources’ proposed $3.3 billion takeover of coal producer Alpha Natural Resources is heading to court instead of a shareholder vote.

Alpha, which operates Letcher County-based Enterprise Mining at Roxana, asked a Delaware court this week to issue an order requiring Cliffs to hold a shareholder vote on the deal Nov. 21 — the date agreed upon by both companies.

Cliffs unilaterally decided to postpone the vote sometime in the past four days, prompting the court action, Alpha spokesman Ted Pile said.

The companies mailed proxy materials to shareholders Oct. 23 and Pile said ballots are being returned already. Alpha is still recommending that shareholders approve the deal.

Cliffs said it plans to fight the lawsuit, which it said has no merit.

The Cleveland-based iron and coal mine operator also said it has rescheduled the vote for Dec. 19 to give shareholders more time to consider new information on the deal’s financial benefits. Cliffs also changed the eligibility requirement for shareholders. Shareholders who own Cliffs’ stock as of Nov. 19 are now eligible to vote.

The Cliffs-Alpha deal already has faced difficulties since it was announced July 16. Cliffs won a proxy fight with hedge fund Harbinger Capital Partners, which wanted shareholder approval to buy up to a third of the company’s shares. Harbinger has labeled the Alpha purchase risky.

Meanwhile, shares of both companies have fallen sharply, driving down the value of the deal from nearly $10 billion. Cliffs stock is off 74 percent over that period, while Alpha has skidded approximately 66 percent. Alpha shareholders would receive 0.95 Cliffs shares and $22.23 in cash for each share held.

A collapse of the deal would be expensive for either Alpha or Cliffs. If shareholders of one company reject it, the company has to pay a $100 million breakup fee. If either company pulls out, it owes $350 million.

Combined, Cliffs and Alpha would have operations in Canada, Australia, Brazil, Michigan, Minnesota, West Virginia, Kentucky, Alabama, Virginia and Pennsylvania.

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