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Arconic (ARNC) CEO Klaus Kleinfeld Quits Amid Proxy Battle

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Klaus Kleinfeld has stepped down as Chairman and CEO of Arconic by mutual agreement with the company’s board amid intense pressure from hedge fund, Elliott Management. He has also resigned as a member of the board.

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”.

Elliott Management, which was founded by billionaire investor Paul Singer, had been actively seeking removal of Kleinfeld since January and has also suggested ways to improve the company’s performance and its share price. The hedge fund, which now owns a 13.2% interest in Arconic, has also nominated four new directors to the company’s board to be voted at its May 16 annual meeting.

With Kleinfeld’s resignation, Elliott Management’s core objective – a CEO change – has been realized, Arconic stated. The company, however, noted that the decision was not made in response to the proxy fight or Elliott Management’s criticisms of Arconic’s strategy and performance.

Arconic has appointed David P. Hess, an incumbent board member, as Interim CEO. Moreover, Patricia F. Russo, who has been serving as the Lead Director of Arconic since 2015, has been appointed as Interim Chair of the board.

The board is looking to hire a “world-class CEO” to ensure a smooth leadership transition for the company’s customers, employees and shareholders, Arconic noted. The company also said that Elliott must now decide whether to continue with its “highly disruptive and distracting” proxy fight or help Arconic in finding a new CEO for a smooth transition.

Kleinfeld led the successful transformation of former Alcoa Inc. that concluded in the launch of two independent, publicly traded companies – Arconic Inc. and Alcoa Corporation (AA - Free Report) –  in Nov  2016.

Arconic’s shares closed around 3% higher at $26.69 yesterday. The company’s shares have gained around 44% year to date, outperforming the Zacks categorized Mining-Non Ferrous industry's gain of roughly 9.5% over the same period.


Arconic is a Zacks Rank #2 (Buy) stock.

Other Stocks to Consider

Other well-placed companies in the basic materials space include Amerigo Resources Ltd. (ARREF - Free Report) and Ternium S.A. (TX - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Amerigo Resources has an expected earnings growth rate of 325% for the current year.

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