Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Arconic Faces Fight with Biggest Shareholder

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Arconic Faces Fight with Biggest Shareholder

Article excerpt

Few things light a fire under a stock faster than a proxy fight where the target company is accused of having one of the worst performing CEOs in the S&P 500.

That's the case Elliott Management is making against Arconic chairman and CEO Klaus Kleinfeld.

Elliott owns about 10 percent of Alcoa's shares and wants to replace Mr. Kleinfeld with Larry Lawson, former CEO of Spirit AeroSystems.

The activist investor is putting up a slate of five directors for Arconic shareholders to vote on later this year. Elliott already has three seats on the 13-member board, positions negotiated after Elliott had discussions with the company.

Back then, the company was Alcoa and was preparing to split into two companies: the new Alcoa, representing the company's mining and aluminum business; and Arconic, the downstream businesses that convert aluminum and titanium into higher-margin products. The split occurred Nov. 1.

News of Elliott's saber rattling sent Arconic shares up 11 percent Wednesday.

Arconic and Mr. Kleinfeld are not amused by the company's largest shareholder, issuing a statement saying the board, including Elliott's three appointees, unanimously support Mr. Kleinfeld.

"The board has conducted an intensive and extensive review of Elliott's allegations and has concluded that many of them are misleading or not substantiated," Arconic said.

Arconic believes Elliott is presenting data that casts Mr. Kleinfeld's performance in an unfair light given the run-up in commodities prices that preceded the 2008 financial crisis and the takeover speculation swirling around Alcoa at that time.

In a securities filing, Arconic said that since the market bottomed in March 2009, Alcoa generated shareholder returns of nearly 90 percent, outperforming other aluminum companies by about 80 percent.

According to the filing, profit margins of Arconic's businesses more than doubled between 2008 and 2015; annual costs were reduced by $4.4 billion; and the value of a former Alcoa share jumped 21 percent between the Nov. 1 split and Jan. 27, outperforming S&P industrial stocks.

So why did Elliott cite "current management's persistent failure," "woefully underperforming business," and "irreparably damaged credibility" in a letter it sent to shareholders? …

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