Arconic, Inc. announced today the sudden departure of chairman and CEO Klaus Kleinfeld.
Activist investor Paul Singer and his Elliott Management, which had held a stake in the old Alcoa, had acquired a 13% stake in Arconic by February and nearly at once nominated five people to Arconic's board and called for Kleinfeld's firing. But Arconic felt the move "showed poor judgement", leading to the decision for Kleinfeld to fall on his sword and end a decade-long career at the United States conglomerate.
The development could alter the course of a proxy fight launched by Elliott in January, when the hedge fund nominated five directors to the company's board and outlined ways for Arconic to improve its share price.
The Arconic Davenport Works location in Riverdale is one of the largest employers in the Quad Cities.
Arconic, a global leader in multi-material, precision engineered products, noted yesterday that the move follows the findings of the company's board that, without authorization by the board, Kleinfeld sent a letter directly to a senior officer of Elliott Management which the board decided was in "poor judgment".
Shares of Arconic climbed $1.46, or 5.6 percent, to $27.36 in morning trading after the announcement.
Elliott is hell bent on adding four directors to the board of Arconic for which investors are scheduled to vote next month.
"It is Elliott Management's decision whether to continue to burden Arconic and its shareholders with its highly disruptive and distracting proxy fight, or to support Arconic in facilitating an effective CEO search and a strong transition", Arconic's statement said.
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.
Alcoa split in two in November 2016, creating Arconic for its growth-oriented businesses such as aerospace and automotive.
Arconic had said the Elliott campaign was more about asserting influence than bettering governance.
With Kleinfeld's resignation, Elliott Management's core objective - a CEO change - has been realized, Arconic stated.
Arconic has appointed David P. Hess, an incumbent board member, as Interim CEO.
Arconic's shares closed around 3% higher at $26.69 yesterday.
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