ArcelorMittal is considering whether to disrupt the $8.8bn takeover of US coal miner Alpha Natural Resources by Cleveland-Cliffs with a counter-bid, people close to the companies say.
ArcelorMittal, the world's largest steelmaker, is also considering other options, including waiting for the deal to fall apart or sitting on the sidelines until it closes so it can buy the combined company.
ArcelorMittal indicated it was willing to make an all-cash offer for Alpha in June, prompting the target to seek other bids, said people close to the companies. They said ArcelorMittal's approach was pegged at or near $110 a share. Alpha shares were trading 3.75 per cent lower at $98.95 by the close in New York.
Alpha was able to drum up a higher cash-and-stock offer from US iron ore miner Cleveland-Cliffs, and then tried to gauge whether ArcelorMittal would top it. Rather than best Cleveland-Cliffs' bid, however, ArcelorMittal pulled back to evaluate the few other large North American coal assets on the market.
That left Alpha matched with Cleveland-Cliffs, and the companies announced a deal on July 16.
Their proposal has run into a significant snag, however.
Top Cleveland-Cliffs shareholder Harbinger Capital opposes the transaction, and holds enough shares to make it difficult for the company to win the two-thirds vote needed to approve the deal.
A Cleveland-Cliffs spokesman said the company had not heard from Harbinger since it initially criticised the deal. Alpha and Harbinger did not return calls for comment. ArcelorMittal had no immediate comment.
Unless Cleveland-Cliffs can change Harbinger's mind, the companies may have handed ArcelorMittal, a key Cleveland-Cliffs customer, an advantage. ArcelorMittal recently bought two relatively small coal miners in West Virginia.
Rather than entering into a bidding war, ArcelorMittal or another steel or mining giant could potentially buy either company more cheaply if the deal falls apart. As one of many foreign companies shopping for assets in the US, ArcelorMittal may also want to avoid generating the impression that it broke up the deal, one person close to the company said.
If the deal wins approval, the company, which would currently have an enterprise value of about $18.5bn, could still make a target. Iron ore and metallurgical coal are steel's two key ingredients and demand for both is strong.