(Adds details from Elliott's release)
By Michael Flaherty
April 25 (Reuters) - Tensions between Elliott Management and specialty metals maker Arconic Inc escalated on Tuesday, as the hedge fund spurned a truce offered by the company and urged shareholders to elect all four of its director nominees.
Elliott's latest letter to shareholders came a day after Arconic said it was willing to interview Elliott's nominees and elect the two best candidates for the seats. That offer was set to expire on Wednesday.
But Elliott fired back, describing the offer as a "sign of desperation" and calling the board "entrenched" amid the drama around the bizarre circumstances behind last week's sudden resignation of its Chief Executive and Chairman Klaus Kleinfeld.
"Given where things stand, we have determined that the only realistic way to produce the kind of change Arconic needs is through the election of all four" of Elliott's nominees, the company said in its letter.
Arconic's board has five seats up for election at the annual meeting. Elliott originally nominated directors for all five spots but has reduced its slate to four because existing director, Ulrich Schmidt, is running for re-election.
Since early this year, the two sides have been locked in a brutal battle for leadership control inside the $10 billion company, which separated from aluminum maker Alcoa Corp last year.
Arconic said on Monday it was postponing its annual meeting from May 16 to the end of the month, in light of Kleinfeld's resignation.
The New York-based company said Elliott had turned down offers to reach a truce, with the latest sticking point focused on the hedge fund's insistence that it receive majority representation on a proposed board-level operating committee.
The two sides had been working toward a settlement agreement to avoid a shareholder vote on the board seats, Arconic said in its statement on Monday, which included letters sent between the two sides.
But a letter from Kleinfeld that led to his resignation threw the settlement discussions into disarray.
Kleinfeld stepped down after the company revealed he had sent an inappropriate letter to Elliott founder Paul Singer earlier this month. Details of the letter emerged late last week, with Kleinfeld insinuating in the April 11 note that Singer had misbehaved at the 2006 World Cup in Germany. (Additional reporting by Rachit Vats in Bengaluru; Editing by Martina D'Couto and Meredith Mazzilli)