Pittsburgh Post-Gazette

Hedge fund says it will continue proxy fight against Arconic

- By Len Boselovic

Pittsburgh Post-Gazette

Elliott Management said Monday it will continue its proxy fight against Arconic despite the resignatio­n of chairman and CEO Klaus Kleinfeld.

The New York-based activist hedge fund, which controls about 13 percent of Arconic’s stock, said an inappropri­ate letter Mr. Kleinfeld sent to one of its officials demonstrat­es that Arconic’s board is not equipped to run the company.

Elliott launched the proxy fight earlier this year, saying it wanted to oust Mr. Kleinfeld and nominate its own slate of directors for Arconic, the specialize­d metals components company created in November when aluminum producer Alcoa was split into two companies.

The hedge fund’s response came after Arconic announced that Mr. Kleinfeld was resigning because of a letter he sent to an unidentifi­ed senior officer of Elliott that “showed poor judgment.”

Mr. Kleinfeld sent the letter without consulting with board members or asking for their authorizat­ion, the company said in a statement.

Elliott issued a statement Monday describing the letter “as a threat to intimidate or extort a senior officer of Elliott Management based on completely false insinuatio­ns.”

The firm did not immediatel­y respond to a request for a copy of the letter.

The activist investor said the incident is another example of Arconic’s directors trying to preserve their jobs and accepting change only when it is inevitable.

“When such conduct manifests itself in a pattern as it has here, it is not a CEO problem. It is a board problem,” Elliott said in its statement. “We intend to pursue our campaign for fundamenta­l board-level change as vigorously as ever.”

Throughout the proxy contest, Arconic’s board has steadfastl­y praised Mr. Kleinfeld’s progress in reviving Alcoa despite a very difficult operating environmen­t. It heaped more praise on him Monday, saying his resignatio­n was not in response to the proxy fight or Elliott’s criticism of Mr. Kleinfeld’s strategy.

“Klaus led a complex and highly successful transforma­tion of Alcoa,” Arconic’s statement said.

Elliott has proposed former Spirit AeroSystem­s CEO Larry Lawson as Mr. Kleinfeld’s replacemen­t.

Arconic appointed David Hess, a former United Technologi­es Corp. executive who was named to Arconic’s board last month, as interim CEO.

The company expressed hope that since Elliott has achieved its main objective, the hedge fund would not continue its proxy fight.

The dispute is scheduled to come to a head May 16, when Arconic shareholde­rs gather for the company’s first shareholde­r meeting in Purchase, N.Y.

Arconic shares closed Monday at $26.69, up 79 cents.

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