UPDATE: The votes have been counted and Casablanca Capital overwhelming won its bid to take over Cliffs Natural Resources, winning all six open spots on the board of directors.
In a release, Casablanca states:
Donald Drapkin, Chairman of Casablanca, said, “We are grateful to our fellow Cliffs shareholders for their careful consideration of the issues and gratified that they have sent a resounding message of support for our efforts to drive meaningful change at Cliffs, bring true accountability to the Company’s leadership, and restore shareholder value.”
Change is afoot.
PREVIOUSLY:
Cliffs Natural Resources holds its annual board meeting later today, a fact that normally might rustle only a few grey eyebrows in the adminsitrative offices of one of Cliffs iron mines here in Northern Minnesota. But this one is different. Today, a hedge fund called Casablanca Capital will bid to take over the company during the annual board of director elections. If Casablanca, a major investor in Cliffs, wins 4-6 seats on the board they control the company.
It might be hard for us here in Northern Minnesota to grasp this situation. After all, the Cliffs-run mines at Hibbing, Eveleth, Babbitt and Silver Bay are having a pretty good year. It wouldn’t seem to most locals that Cliffs would need an overhaul. But Deleware-based Casablanca is a global operator, and they want to see more profitability worldwide from Cliffs Natural Resources.
John Myers reported on the Casablanca bid to takeover Cliffs Natural Resources in Monday’s Duluth News Tribune.
Cliffs is the descendent of one of Minnesota’s oldest mining company’s. Alongside U.S. Steel, Cliffs represents one of the twin titans of Iron Range mining (though there are other players like Arcelor-Mittal, Magnetation, and Essar Steel jockeying on the stage, too).
There is a duel crisis here. If Cliffs fends off the takeover bid, Wall Street is unlikely to reward them and cuts might be needed across the company.
If Casablanca wins, it’s hard to say how they will change operations in Minnesota. They’re bankers and brokers, not miners. It stands to reason they’ll want cost containment, more automation and more production. It’s possible they’d chop up the company and sell off parts, including perhaps the mines here on the Range. There would be reason to be nervous about major changes that could affect Iron Range mining employment in this kind of environment.
Or maybe nothing changes. But that’s never safe money on the Iron Range.
Or maybe Casablanca perceives a greater value in Cliffs assets than the company itself did. I know there have been other investment groups looking at Cliffs in recent years, and they considered selling off the coal mining operations and concentrating on iron mining, which would seem to be to our advantage here?
After all, “Bankers and brokers” provided the capital for the original development of Iron Range mining.
But, everything changes. Always.
That’s all true. At first blush it wouldn’t seem that new management would want to change much about the money they make in northern MN. Market people I talk to say iron ore is safe money right now. I guess I sense that there is more consolidation to come in Northern MN taconite operations and that this is the kind of thing that could bring that about quicker. But whatever comes was probably always going to come anyway. That’s why I’m always harping about being prepared for changes in the economic winds. Thanks for the comment.
It is interesting to see the changes that industries face over time. My grandfather’s father worked in the mining industry for a long time. They dealt with similar issues. Sometimes it is cool to see things in the past reoccurring today.