Elliott Management Corporation (“Elliott”), which manages funds that collectively beneficially own a 13.2% economic interest in Arconic Inc. (NYSE:ARNC) (“Arconic” or the “Company”), today released a statement in response to the Company’s disclosure last night of its decision to trigger a $500 million “poison put” designed to entrench management.
The facts are these:
Elliott believes that the election of its nominees will not trigger the change in control provision at the heart of the Hidden April Poison Put. Furthermore, multiple legal avenues exist to protect the voting rights of all Arconic shareholders and to remove this potential liability that Dr. Kleinfeld and/or the Board have irresponsibly put in place. Elliott intends to vigorously protect the long-term value of Arconic from these destructive self-serving actions.
First, it is clear that this action was taken for entrenchment purposes in violation of fiduciary duty.1 The only question outstanding is who was involved? Did Dr. Kleinfeld act alone, with other members of management, or with the Board’s knowledge and/or approval?
Second, Arconic under Dr. Kleinfeld compounded this breach of fiduciary duty by concealing it from shareholders until it was triggered, likely in violation of federal securities laws:2
This two-step process – an entrenchment action followed by an egregious failure to disclose the action – has become a familiar pattern at Arconic under Dr. Kleinfeld. For example, we have written you at length about management’s apparent decision to trade certain legal claims against the Seller of Firth Rixson (the “Seller”) to obtain $20 million and a written agreement from the Seller to vote its Arconic stock in favor of Dr. Kleinfeld’s re-election and the Board’s recommendations for a period of two years (the “Secret August Voting Lock-Up”).
Last week, we launched a clearinghouse for information about the Secret August Voting Lock-Up on NewArconic.com, where we continue to ask: If the Company has nothing to hide, why the continued obfuscation? If the Board truly believes this is a non-issue, then why not come clean to shareholders and provide a full explanation to put the issue to bed?
The Hidden April Poison Put and the Secret August Voting Lock-Up are only the latest and most disturbing additions to the numerous other outdated and substandard corporate governance practices lurking in Dr. Kleinfeld’s House of Horrors. Others include:
After all this, what governance horror could possibly be next?
This May 16, shareholders can escape from this nightmare by voting the BLUE proxy card to instill a culture of accountability at Arconic. Elliott’s new investor presentation, “A New Arconic,” available for download here, presents a vision of what Arconic could achieve with world-class corporate governance (slides 281-286).
Arconic shareholders can help make this vision a reality by voting the BLUE card today.
Elliott Associates, L.P. and Elliott International, L.P. (collectively, “Elliott”), together with the other participants in Elliott’s proxy solicitation, have filed a definitive proxy statement and accompanying BLUE proxy card with the Securities and Exchange Commission (“SEC”) to be used to solicit proxies in connection with the 2017 annual meeting of shareholders (the “Annual Meeting”) of Arconic Inc. (the “Company”). Shareholders are advised to read the proxy statement and any other documents related to the solicitation of shareholders of the Company in connection with the Annual Meeting because they contain important information, including information relating to the participants in Elliott’s proxy solicitation. These materials and other materials filed by Elliott with the SEC in connection with the solicitation of proxies are available at no charge on the SEC’s website at http://www.sec.gov. The definitive proxy statement and other relevant documents filed by Elliott with the SEC are also available, without charge, by directing a request to Elliott’s proxy solicitor, Okapi Partners LLC, at its toll-free number 1-877-869-0171 or via email at email@example.com.
Elliott Management Corporation manages two multi-strategy hedge funds which combined have more than $32 billion of assets under management. Its flagship fund, Elliott Associates, L.P., was founded in 1977, making it one of the oldest hedge funds under continuous management. The Elliott funds’ investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm.
1 As the Delaware courts have clearly ruled in connection with poison puts in debt instruments: “[t]he incumbent board must approve the new directors as a matter of its obligations to the company and its stockholders, even if it believes itself to be better qualified and have better plans for the corporation than the rival slate. The stockholders, after all, have a fundamental interest in freely choosing themselves who should constitute the board.” Kallick v. Sandridge Energy Inc. 68 A. 3d 242 (Del Ch. 2013).2 See Item 6(d) of Schedule 14A and Regulation S-K 402 and 403.
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