Elliott Wins Three Arconic Board Seats in Truce to Activist Feud

Updated on
  • Singer’s hedge fund boosts influence after proxy campaign
  • Deal ends battle that led to departure of manufacturer’s CEO

Elliott Management Corp. will gain three seats on the board of metals manufacturer Arconic Inc. after waging one of the biggest proxy battles of the year.

The New York hedge fund controlled by billionaire Paul Singer will name three directors, Arconic said in a statement Monday. The maker of aluminum parts for cars and planes will nominate two directors and consider hiring Elliott’s preferred candidate as chief executive officer, Larry Lawson.

The deal positions the hedge fund to gain greater sway over Arconic as the Boeing Co. supplier rebounds from last month’s departure of CEO Klaus Kleinfeld. The former boss stepped down after sending a letter to Singer that Elliott described as threatening. Arconic said it would reincorporate in Delaware and provide for an annually elected board, a move that could help Elliott further strengthen its grip.

“The board might have seen some risk going into the vote, and Elliott is getting things they may not have gotten directly in the vote,” said Josh Sullivan, an analyst at Seaport Group. “With reincorporation in Delaware, every 12 months they could ramp up the campaign to get more board members on.”

Arconic rose 0.2 percent to $27.65 at 2:15 p.m. In New York. The shares had advanced 49 percent this year through May 19, the third-biggest gain on the S&P 500 Index.

‘Constructive Agreement’

“We are pleased to have reached a constructive agreement with Elliott, our largest shareholder, and look forward to working collaboratively with Elliott to enable Arconic to realize the full potential of its great businesses,” New York-based Arconic said in the statement.

The year’s shareholder vote to elect board members is scheduled for May 25. Elliott will nominate Chris Ayers, Elmer Doty and Patrice Merrin to the board. Arconic will propose interim CEO David Hess and Ulrich Schmidt. The nominees will be unopposed. Both sides agreed to withdraw their other proposed candidates as part of their deal.

“We believe the governance improvements and substantial infusion of new perspectives and talent into the board announced today – with highly qualified directors being drawn from both the Elliott and company cards – will successfully position Arconic to realize its immense potential,” Dave Miller, senior portfolio manager at Elliott, said in the statement.

Elliott, which had been backing four director nominees, rejected a company offer of two board seats last month.

Shareholder advisory groups had been divided in their recommendations. Institutional Shareholders Services Inc. had recommended backing two Elliott candidates, Ayers and Doty, while Glass Lewis & Co. recommended all four of the fund’s nominees. Elliott named three other Arconic board members following a 2016 agreement.

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