Elliott Rejects Arconic's Board Offer, Extending Proxy Fight -- 2nd Update
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 email@example.com
(END) Dow Jones Newswires
April 25, 2017 20:43 ET (00:43 GMT)