The board of Cleveland-Cliffs Inc. decided Monday to try to sell or recapitalize the company that has been the object of a proxy fight by New Jersey investor David Bolger, officials said.
M. Thomas Moore, president and chief executive of the multimillion-dollar natural resources company, said the board members made the move to increase stock value for shareholders. Last month's stock market crash contributed to the move, he said.
During the past five weeks, Cliffs has lost about a third of its value, dropping from about $17 a share to a low of less than $10 a share, Moore said. But its shares rose $2.675 Monday when the directors' decision was announced, closing at $15.25 on the New York Stock Exchange.
"You have to recognize that our stock is held very substantially by institutions--mutuals funds, etc.," Moore said in a telephone interview. "And many of them have come under a lot of pressure with the general fall of the stock market. So people are looking for ways to achieve earlier returns than maybe a more traditional strategy might achieve."
Bolger, who controls more than 5% of Cliffs stock, has forced a special meeting of shareholders for Dec. 15. He plans to propose that Cliffs' board be thrown out and replaced by one he has named.
Earlier this month, shareholder Morris Rottman of Chicago filed a class-action lawsuit to push Cliffs' board to negotiate more actively the sale of the corporation. Bolger said he didn't know Rottman.
Asked what effect Bolger had on the decision to seek a buyer or to recapitalize, Moore said, "He's one of our shareholders. He has had certain views. He has not made any specific proposals, but he has made references to the sale of the company or recapitalization. We have tried, in designing our program, to reflect the interests of all the shareholders."
Cliffs, which has about $400 million in annual revenue, produces and sells iron ore, coal, hardwood lumber and veneer. It also supplies turnkey contract services for oil and gas drilling, sells commodities and owns 26% of MLX Corp.
The company has about 8,000 employees worldwide, most of them in the United States and 250 of them at its Cleveland headquarters.
Moore declined to say how the company might recapitalize, or alter its mix of debt and equity. Cash or other assets could be distributed to shareholders, he said.
Among the developments expected by the end of the first quarter of 1988 are the completion of the sale of Cliffs' electric power assets and negotiation with the partners in Cliffs' Tilden Mine near Marquette, Mich., on converting the mine to a process that would be less costly, Moore said.