Falcone's Harbinger Said to Study Selling Ferrous Stake as Part of IPO
Harbinger Capital Partners LLC, the hedge fund founded by billionaire Philip Falcone, is studying the sale of a portion of its 26.6 percent stake in Ferrous Resources Ltd., said four people with knowledge of the matter.
The fund, which manages $10.1 billion, is considering the sale as part of the iron ore company’s planned initial public offering, said the people, who declined to be identified because the sale is confidential. Ferrous is seeking to sell $350 million to $400 million in new shares in its IPO to fund its iron ore operation in Brazil, one of the people said.
Harbinger, the biggest holder of Ferrous, is the largest shareholder in New York Times Co. and counts stakes in mining companies Cliffs Natural Resources Inc. and Freeport McMoran Copper & Gold Inc. among its top 10 holdings. Last month it sold A$150 million ($134 million) of stock in Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter.
The fund, based in New York, is expected to agree to hold a portion of its current stake for a defined period, one of the people said, declining to elaborate. Other shareholders are also seeking to sell some of their equity as a secondary part of the planned IPO, the person said.
Ferrous may begin meeting with potential investors next week and aims to start trading in London by early June, two of the people said.
JPMorgan Cazenove Ltd., Morgan Stanley and Deutsche Bank AG are lead arrangers for the IPO, three people familiar with the sale said in March. BMO Capital Markets, Liberum Capital Ltd. and RBC Capital Markets are co-lead arrangers, the people said.
Ferrous said March 17 it reached sales agreements with Chinese steelmakers Jiangsu Shagang Group Co., Beijing Shougang Steel Group and an unidentified state-owned company. It’s in other supply negotiations that may give participants in the talks a stake in the company or a role in its funding, Ferrous said in a statement.
The company, which had about $493 million of cash as of Dec. 31, is seeking funds to build the $3 billion first stage of the Viga mine project, according to a Feb. 3 statement on its website.
Ferrous shelved an IPO in 2008 as commodity prices slumped and world economies slowed. The producer was set up in 2007 and raised $1.26 billion from private placements between June 2007 and August 2008, according to its website.
Bob Graham, director and head of business development at Ferrous, said in November the company was seeking $2.7 billion through a combination of debt, an IPO and investment from a strategic partner. Ferrous intended to borrow about $1.3 billion, according to Graham, a former head of Rio Tinto Group’s Brazilian unit.
Ferrous is seeking to start output by the end of 2013 at an initial rate of 25 million metric tons of iron ore a year. A second stage expansion of its projects is planned to boost production to 50 million tons a year by the end of 2016.
Chairman Gordon Toll previously held the role at Fortescue, controlled by Australia’s richest man Andrew Forrest. Falcone’s Harbinger is also a shareholder in Perth-based Fortescue.