International mining company Cliffs Natural Resources has confirmed that it has ended its plan to acquire coal miner Alpha Natural Resources and agreed to pay $70M to Alpha to settle litigation between the companies.
Cliffs Natural Resources said that the boards of directors of both companies have approved settlement of litigation brought by Alpha in Delaware Chancery Court and termination of the previously announced definitive merger agreement, under which Cliffs would have acquired all outstanding shares of Alpha.
The companies said that each board's decision was made after considering various issues, including the current macroeconomic environment, uncertainty in the steel industry, shareholder dynamics and risks and costs of potential litigation. Considering these issues, each board determined that settlement of the litigation and termination of the merger agreement were in the best interests of its equity holders.
Alpha and Cliffs added that, going forward, the companies plan to work together to find ways to ‘realise synergies in their respective coal operations.’
Under the terms of the settlement agreement, the merger agreement will be terminated, Cliffs will pay Alpha $70M, Alpha will dismiss the Delaware litigation with prejudice and the parties will release each other from all obligations with respect to the proposed transaction as well as from any claims arising out of or relating to the merger agreement.
In July, Cliffs agreed to buy Alpha in a cash and stock deal originally valued at about $8.3B. The value of the deal, which would have created the largest North American producer of metallurgical coal, has fallen to about $2.9B amid global financial market weakness and fluctuating commodity prices.
The deal had been hurt by opposition from Cliffs's largest shareholder, hedge fund Harbinger Capital Partners, which wanted Cliffs to consider a sale, recapitalisation or an alternative transaction.
