Arconic CEO Klaus Kleinfeld steps down

The CEO of Arconic has stepped down after an ugly battle with hedge fund titan Paul Singer

The company says Kleinfeld's departure is by mutual agreement with the board of directors, after the board learned Kleinfeld sent an unauthorized letter directly to an officer of Elliott Management, Arconic's largest shareholder.

Through the Orbis family of funds, Orbis has been a shareholder in Arconic and its predecessor company, Alcoa Inc., since 2013, and now owns more than 17.2 million shares of Arconic, or 3.9% of shares outstanding.

Elliott had been campaigning for the ouster of Kleinfeld and had engaged Larry Lawson, formerly CEO of aircraft parts supplier Spirit AeroSystems Holdings Inc, as a consultant. Leaving with Arconic was supposed to be a path to consistently higher profits, without the threat of commodity cycles harming the bottom line. Arsenic, lead and mercury and other potentially harmful contaminates leach from massive pits of waterlogged ash left behind after burning coal to generate electricity.

The dispute between Arconic and Elliott is slated to come to a head when Arconic shareholders meet May 16 in Purchase, N.Y.

Arconic's shares jumped eight per cent to $28 per share following the news on Monday morning in NY. In addition to Kleinfeld's exit, Elliott called for Arconic to cut corporate costs and improve margins in its engineered products and aluminum sheet business lines.

Kleinfeld oversaw the split-up of Alcoa Inc into Arconic and Alcoa Corp past year. The firm could be making $25.2 million on its Arconic bet on Monday. Elliott responded by saying Arconic's change-in-control claim was false, and was "an act of desperation" to entrench itself.

Elliott has been in the news this month after putting pressure on BHP to shakeup the structure of the company.

Arconic said Kleinfeld's letter was sent to a senior official at Elliott Management, an activist investor that has been pushing the company to replace Kleinfeld. Kleinfeld has been on Alcoa Inc.'s board of directors since 2003, and became Alcoa's CEO in 2008, a role he retained after the company separated into Arconic Inc. and Alcoa Corp.

The local Arconic plant was an Alcoa facility until November, when New York-based Alcoa separated into two companies-Alcoa Corp. and Arconic.

David Hess, who was appointed as interim CEO on Monday, is a candidate for director but hasn't indicated whether he wants the top job.

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".

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