US specialty metals maker Arconic has announced that chief executive Klaus Kleinfeld resigned after it found he sent a letter in “poor judgment” to Elliott Management, with whom it is embroiled in a proxy war and which used the chance to again criticise the company’s board.
Activist hedge fund Elliott said the letter “read as a threat to intimidate or extort a senior officer of Elliott Management based on completely false insinuations” and that it immediately informed Arconic’s board of the letter.
Elliott said the letter “read as a threat to intimidate or extort a senior officer of Elliott Management”. Photo: Bloomberg
Elliott has been in the news this month after putting pressure on BHP to shakeup the structure of the company.
Arconic said Kleinfeld resigned as he sent the letter – the content of which neither party made public – without consulting the board, and not in response to the proxy fight or Elliott’ criticisms of the company’s strategy, leadership or performance.
Elliott Management Corporation CEO Paul Singer is never one to back down from a stoush. Photo: Bloomberg
Arconic also said its board reaffirmed the strategy developed by Kleinfeld, under whose leadership, it said, the company improved its performance.
Elliott said the company’s statement was to defend Kleinfeld and “should be enough to prove that Arconic’s Board simply lacks the judgment to steward Arconic.”
Elliott, which owns a 13.2 per cent stake in Arconic, started its campaign against the company in January, when it nominated five directors to the board and outlined ways for Arconic to improve its share price.
Arconic’s stock jumped as much as 9.8 per cent on Monday, before easing to trade up 2.5 per cent at $US26.56 in late afternoon trading. The stock had risen nearly 14 per cent since Elliott mounted its proxy bid through its close on Thursday.
Kleinfeld had served as Alcoa Inc’s CEO for eight years and oversaw the company’s split-up into Arconic and Alcoa Corp last year.
Arconic said since Elliott’s central objective – a CEO change – had been realised, the hedge fund should now chose whether to go ahead with its proxy fight or help find Kleinfeld’ successor.
The company said its interim CEO would be David Hess, a former United Technologies Corp executive who was appointed as an independent director to Arconic’s board in March.
Elliott’s choice to lead Arconic has been Larry Lawson, who resigned as CEO of aircraft parts supplier Spirit AeroSystems Holdings Inc last July. Lawson is also Elliott’s consultant.
Elliott reported in March that Spirit AeroSystems had said Lawson breached a non-compete clause in his retirement contract by consulting for Elliott, a view the hedge fund has said it disagreed with.