Klaus Kleinfeld resigns as Arconic CEO

April 17—Elliott Management said Monday it will continue its proxy fight against Arconic despite the resignation of chairman and CEO Klaus Kleinfeld.

The New York-based activist hedge fund, which controls about 13 percent of Arconic's stock, said an inappropriate letter Mr. Kleinfeld sent to one of its officials demonstrates that Arconic's board is not equipped to run the company.

Elliott launched the proxy fight earlier this year, saying it wanted to oust Mr. Kleinfeld and nominate its own slate of directors for Arconic, the specialized metals components company created in November when aluminum producer Alcoa was split into two companies.

The hedge fund's response came after Arconic announced that Mr. Kleinfeld was resigning because of a letter he sent to an unidentified senior officer of Elliott that “showed poor judgment.” Mr. Kleinfeld sent the letter without consulting with board members or asking for their authorization, the company said in a statement.

Elliott issued a statement Monday describing the letter “as a threat to intimidate or extort a senior officer of Elliott Management based on completely false insinuations.” The firm did not immediately respond to a request for a copy of the letter.

The activist investor said the incident is another example of Arconic's directors trying to preserve their jobs and accepting change only when it is inevitable.

“When such conduct manifests itself in a pattern as it has here, it is not a CEO problem. It is a board problem,” Elliott said in its statement. “We intend to pursue our campaign for fundamental board-level change as vigorously as ever.”

Throughout the proxy contest, Arconic's board has steadfastly praised Mr. Kleinfeld's progress in reviving Alcoa despite a very difficult operating environment. It heaped more praise on him Monday, saying his resignation was not in response to the proxy fight or Elliott's criticism of Mr. Kleinfeld's strategy.

“Klaus led a complex and highly successful transformation of Alcoa,” Arconic's statement said.

Elliott has proposed former Spirit AeroSystems CEO Larry Lawson as Mr. Kleinfeld's replacement.

Arconic appointed David Hess, a former United Technologies Corp. executive who was named to Arconic's board last month, as interim CEO. The company expressed hope that since Elliott has achieved its main objective, the hedge fund would not continue its proxy fight.

The dispute is scheduled to come to a head May 16, when Arconic shareholders gather for the company's first shareholder meeting in Purchase, N.Y.

Arconic shares closed Monday at $26.69, up 79 cents.

Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.

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