Cleveland Cliffs Inc. (NYSE: CLF) is fighting an activist hedge fund and seeking support from... shareholders? Harbinger Capital is currently the company's largest shareholder with a 15.57% stake, but it is seeking to increase its stake to as much as 33.33%. The move could damage the firm's plan to purchase Alpha Natural Resources for $8.1 billion, which Harbinger has ademantly opposed for quite some time. With a 2/3 majority required to approve the buyout, a 1/3 stake by Harbinger could be problem.

Recently, Harbinger requested that Cleveland Cliffs hold a shareholder value, required under Ohio law, that would allow the hedge fund to increase its stake to between 20% and 33.33%. The vote is scheduled for this Friday and may lead to the rejection of the $8.1 billion buyout bid. As a result, Cleveland Cliffs has been reaching out to shareholders in an effort to derail the attempt to gain approval - a move that is quite atypical for activist situations.

Today, Cleveland Cliffs came one step closer to buying out the firm by gaining anti-trust approval by the Federal Trade Commission. However, the vote on the proposed buyout is scheduled for October 3rd, giving Harbinger another month to build and prepare its stake to oppose the merger that it sees as a bad move for the company. So far, few other large shareholders have voiced their opinions on the merger, which makes it a situation certainly worth watching.

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99 Cents Only Stores (NYSE: NDN) may be getting more than they bargained for with one large investor. Akre Capital Management disclosed an 11.26 percent stake in the discount chain and recommended that it explore strategic alternatives to unlock shareholder value in a Schedule 13D/A filing with the SEC. These alternatives may include discontinuing certain businesses, repurchasing shares with excess cash and refocusing on maximizing profitability rather than expanding.

Akre Capital Management focused its message on 99 Cents Only Stores' Texas market, which has experienced substantial problems. The hedge fund recommends that the company reconsider maintaining a presence in Texas and asked two key questions for management to consider:

1. What existing Texas operating data can be referenced as evidence that this new strategy will be successful, what capital will remain actually invested in the market, what profits are expected, and how will this strategy be executed?
2. Why does the company believe that expanding finite management resources on a small opportunity in Texas make sense when the remaining 90%+ of the business remains distressed and offers much greater potential?
   

"We acknowledge that the company has begun to address shareholder concerns about a turnaround plan, store growth rate, and use of excess cash," said the hedge fund in a letter to the board of directors. "We are hopeful that these actions mark the beginning of an effort by the company to be more transparent about how it plans to create per share value."

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TransAlta Corporation (NYSE: TAC) directors are facing increasing pressure to sell after a popular activist hedge fund added its voice to a chorus of dissident shareholders. The Children's Investment Fund Management, known as TCI in the investor community, filed its Schedule 13D with the SEC last week showing a six percent stake and demanding some changes. The activist hedge fund wants the company to consider an auction or stragic partnership to boost shareholder value.

Here's a transcript from the letter to the board:

TCI believes  that the public  proposal by LS Power  Equity  Partners and Global Infrastructure  Partners  published  on 21 July 2008 to  acquire  TransAlta  for Cdn$39 per share, significantly undervalues the company.

TCI urges the Special  Committee to immediately  undertake a review of strategic alternatives,  complete  this  expeditiously  and  take all  necessary  steps to maximise value for shareholders.

Further, TCI agrees with the  representations  made to you by Seneca Capital in its  public letter dated 22 July 2008.

TCI  would  welcome  an open and  direct  dialogue  with the  Special  Committee throughout the strategic review process.

TransAlta is a wholesale power generator and marketer focused on the western regions of Canada and the United States. The company owns, operates and manages a contracted and geographically diversified portfolio of assets, and has capability in generation fuels, including coal, natural gas, hydro and renewable energy. Approximately 70% of its capacity is contracted under government-mandated power purchase agreements or long-term contracts.

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