Alcoa Yields to Elliott With Manufacturing Boost to Boardroomby
Elliott nominees to join Alcoa board ahead of split-up
Singer-founded fund holds about 7.5% of Alcoa common stock
Alcoa Inc. is keeping Paul Singer on its side as it prepares to split into two in the midst of the lowest aluminum prices in six years.
The New York-based producer on Monday accepted Elliott Management Corp.’s three board nominees, adding members with aerospace and automotive experience before it divides its metal-making assets from those that make aluminum components. Elliott, the Singer-founded fund more widely known for fighting corporate managements, has expressed support for the split.
Activist investors from Elliott to Carl Icahn are finding a receptive audience in commodity producers buffeted by slumping prices. Alcoa’s announcement follows Freeport-McMoRan Inc.’s boardroom overhaul and pledges to step up a war against debt after Icahn entered the shareholder register.
“In the commodity space, with the last two major activist campaigns you’ve seen those activists gain seats on boards, you’ve seen management teams move to make substantial changes,” Anthony Young, an analyst at Macquarie Group Ltd., said by telephone Monday. Recommendations are being incorporated “much more quickly than in other industries.”
Elliott, based in New York, has sought changes at major companies including Hess Corp. and Samsung Group and built up a 7.5 percent stake in Alcoa on the assumption that the market was undervaluing the manufacturing business. Its three nominees were accepted immediately by Alcoa, said people with knowledge of the talks.
In October, Phoenix-based Freeport agreed with Icahn to appoint Andrew Langham and Courtney Mather to its board. Last month it extended spending and production cutbacks in a battle to preserve cash amid a deepening commodity meltdown.
Alcoa’s proposed split, which was announced in September, is scheduled to be completed in the second half of this year. A global glut has sent the price of aluminum to near a six-year low, while Alcoa expects demand for aluminum products to grow by 6 percent. Its shares fell 1.1 percent in New York Monday, extending a slump this year to 27 percent.
Elliott’s nominees of Ulrich Schmidt, John Plant and Sean Mahoney will expand Alcoa’s board to 15 members. After the split, each of the board members nominated by Elliott will be a director of both of the resulting companies, Alcoa said in a filing Monday.
Schmidt is a former chief financial officer of Spirit Aerosystems Holdings Inc. and a former director of Precision Castparts Corp., the aerospace supplier purchased by Warren Buffett’s Berkshire Hathaway Inc. Plant was chairman and CEO of TRW Automotive, while Mahoney is a director of Delphi Automotive Plc. and spent 21 years in investment banking at Deutsche Bank AG and Goldman Sachs & Co.
“Each of our new directors is a high caliber executive with a proven track record of success, and each brings valuable skills highly relevant to the markets we serve, including aerospace and automotive,” Chief Executive Officer Klaus Kleinfeld. “We look forward to drawing on their expertise as we launch two independent companies positioned for success.”