(Adds background, details on Elliott campaign)
By Michael Flaherty
May 22 Specialty metals company Arconic Inc
struck a deal with Elliott Management on Monday, ending
a battle for control of the company's board that was days away
from culminating in a shareholder vote.
From the start of its public campaign in January, Elliott
said Arconic, the $12 billion company that separated from Alcoa
Corp last year, needed new leadership and that its
performance had missed targets and lagged peers.
Arconic shares could more than triple if the company cut
costs and made other operational changes, according to Elliott's
presentations. The fund is Arconic's largest shareholder, with a
13.2 percent stake.
The truce takes the drama out of Arconic's annual
shareholder meeting on Thursday, as the vote is no longer
contested, and the two sides have agreed to terms including the
five directors who will stand for election.
Other terms include Elliott's placement on the board's chief
executive search committee and Arconic moving to annual board
Elliott invested in Alcoa in 2015, and the company reached a
settlement a year later with the hedge fund, which got three
directors it supported onto the company's board.
Elliott had taken aim at Arconic's former CEO Klaus
Kleinfeld directly, questioning his leadership and management
skills. Kleinfeld was forced to resign after sending a
threatening letter to Elliott's founder, Paul Singer, that
Arconic's board did not approve.
Arconic said last month that Elliott had rebuffed several
attempts by the company to reach a settlement.
Elliott had nominated four directors to serve on Arconic's
board, pitting them against four of the five company nominees.
The activist investor supported one of Arconic's nominees, board
member Ulrich Schmidt.
As part of the deal, Elliott will reduce its nominee slate
to three directors: Christopher Ayers, Elmer Doty and Patrice
Merrin. Arconic will reduce its slate to Schmidt and David Hess,
the company's interim CEO.
One of Elliott’s director nominees will be added to the CEO
search committee, Arconic's statement said.
Director representation on the search committee was a
sticking point in the original settlement talks, the company
said last month, as Elliott originally pushed for three of its
directors on the committee.
Elliott also wanted majority representation on the board's
operating committee, the company had said, an issue that the
Arconic release did not mention on Monday.
In addition, Arconic announced that director Rafael Reif,
who was not up for election, will step down from the board after
the shareholder meeting and be replaced by James Albaugh, one of
the nominees on its original slate.
Arconic also said it would begin the process of
reincorporating in Delaware, a state that requires company
boards stand for annual election. The company has a staggered
board, meaning it only puts a certain number of directors up for
election every year, a policy that tends to annoy investors that
want more board member accountability.
Elliott had disclosed a large stake in Arconic, which
provides aluminum and titanium alloys used in planes and cars,
shortly after it separated from aluminum maker Alcoa last
November, and has since built that stake to more than 13
The hedge fund launched its director slate at the end of
January, officially starting the proxy fight.
Arconic shares were up 0.4 percent on Monday at $27.69.
(Additional reporting by Arunima Banerjee in Bengaluru; Editing
by Sriraj Kalluvila and Meredith Mazzilli)