Analysts generally questioned whether Cliffs seaborne assets would have the longevity to support continued investment in Bloom Lake. Meanwhile, some challenged the logic of a sale of logistics assets or a doubling of the company's dividend. Other proposals such as expense reductions are already in progress.
However, there is a prospect that Wall Street has been too dismissive of Casablanca's proposal.
Over its six-week engagement with Cliffs, Casablanca has proved it has management's ear. Cleveland-based Cliffs said in a Jan. 28 press release it "has held productive preliminary conversations": with the fund and "looks forward to continuing the dialogue to better understand their assumptions, projections and overall views."
Cliffs has also followed through on one recommendation by Casablanca in hiring JPMorgan (JPM) as its financial advisor and Wachtell, Lipton, Rosen & Katz as legal counsel.
Mining for Opportunity
As with many successful recent activist investments, Cliffs may also already have the wheels in motion on significant change.
As Casablanca noted in its letter, the company's board of directors has already turned over significantly after years of criticism. Meanwhile, analysts are already forecasting expense reductions that could bring costs at Cliffs in line with industry peers.
Casablanca, for its part, would welcome an investment that takes little prodding. "Our favorite outcome is to have an engaging and constructive dialogue," CEO Taylor said.
Maybe in an investment climate where activists are willing to become increasingly hostile with management, it might take the finesse of long-time M&A bankers to pull off a re-shaping of Cliffs Natural Resources.