Elliott Rejects Arconic's Board Offer, Extending Proxy Fight -- 2nd Update
April 25 2017 - 8:58PM
Dow Jones News
By Joshua Jamerson
Arconic Inc.'s interim chief executive said he hasn't decided
whether he wants to the job permanently, a week after a monthslong
spat with an activist investor caused the abrupt resignation of CEO
Klaus Kleinfeld.
David Hess told analysts Tuesday "he's approaching the job as if
I'm here forever," by taking a hands-on approach to managing the
aluminum parts maker for the aerospace and auto industries.
"I haven't made that decision as to whether I want to be a
candidate for the permanent CEO job," he said.
Mr. Hess, a former aerospace executive at United Technologies
Corp. who joined the Arconic board in March, said a search is under
way for a permanent CEO. He gave no indication when the board is
likely to make a decision.
"I'm excited to lead [the company] through a challenging period
as we conduct a permanent CEO search," he said during a discussion
of the company's first-quarter results.
Mr. Hess made no mention of Elliott Management Corp.'s proxy
campaign to install new directors and its own choice for CEO.
Elliott on Tuesday rejected a proposal from the company to
settle the dispute without a shareholder vote on the hedge-fund
manager's board candidates. Arconic offered to add two more Elliott
representatives to the board in addition to three already serving
and make "other certain concessions..
Elliott said Tuesday that the board's offer was insufficient and
vowed to proceed with a shareholder vote on its slate of four board
candidates. The company on Monday postponed the May 16 annual
meeting in hopes of defusing the dispute.
"At this point, given where things stand, we have determined
that the only realistic way to produce the kind of change Arconic
needs is through the election of all four of the highly qualified
shareholder nominees to Arconic's board," Elliott wrote in a letter
to shareholders Tuesday.
Arconic declined to comment on the rejection as it focused on
the better-than-expected first-quarter sales and profit released
Tuesday.
The New York-based company reported profit of $322 million, or
65 cents a share, up from $16 million with per-share earnings
breaking even a year ago. Several one-time gains from assets sales
swelled results. On an adjusted basis without the one-time items,
earnings rose to 33 cents, up from 26 cents a year earlier. Revenue
rose 4.5% to $3.19 billion. Analysts were expecting 24 cents a
share on revenue of $3 billion.
Arconic logged solid growth in sales and profit growth in its
rolled products and transportation business units, offsetting tepid
results from its closely watched engineered products business,
where pretax income was flat and the margin was down slightly at
20.6%.
The company said the unit's aerospace sales were up, but offset
by higher costs for starting production on certain new engine
parts.
We've had a lot of new product introductions going on," Mr. Hess
said.
"There's [costs] that you experience when you're up high in a
learning curve with a new program that you'll see move down " as
production accelerates,
Mr. Hess said he intends to carry forward on the long-range
targets established by Mr. Kleinfeld and the board, including a
commitment to product research and development and reducing
overhead costs.
Elliott, which owns a 13.2% stake in the company, remains highly
critical of the company's financial targets, accusing the board and
other executives of failing to diligently manage the company for
profit growth.
Arconic split from aluminum producer Alcoa Corp. last fall to
pursue high-margin business lines in supplying aluminum sheet,
plate and metal products to the auto, aerospace and transportation
markets.
Much of the hedge-fund manager's criticism was directed at Mr.
Kleinfeld.
He resigned under pressure after sending a letter to Elliott
founder Paul Singer that the hedge fund viewed as a veiled threat.
The Arconic board said the letter showed poor judgment and wasn't
authorized by the board.
Joshua Jamerson and Ezequiel Minaya contributed to this
article.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
April 25, 2017 20:43 ET (00:43 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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