The Secret August Voting Lock-Up Explained

Take a look at the brief history of inappropriate vote buying, subterfuge, and stonewalling. This troubling episode reveals yet another management mistake that squandered value for a company with great potential. The Secret August Voting Lock-Up is part of a disturbing pattern from the current CEO. Review the facts and add your name to demand a new direction at Arconic.

Arconic entered into the Secret August Voting Lock-Up on August 18, 2016, while in the middle of a proxy solicitation. The existence of the Secret August Voting Lock-Up was kept hidden for over 200 days and not disclosed until the filing of the final proxy on March 13, 2017, and then was buried on page 36 of the filing. To date, the text of the Secret August Voting Lock-Up has not been filed, and Arconic has failed to provide the agreement pursuant to a properly constituted books and records request under Pennsylvania law.

2014

November 20

Alcoa Inc. (now known as Arconic Inc.) purchases Firth Rixson for $3 billion in cash and stock. CEO Dr. Klaus Kleinfeld promises $1.6 billion of revenue and $350 million of EBITDA from the acquisition by 2016.

November 2014 – August 2016

Firth Rixson massively underperforms, ultimately bringing in 40% less revenue and 60% less EBITDA than Dr. Kleinfeld promised. As a result of this staggering underperformance, Arconic would likely have potential legal claims against the Seller of Firth Rixson.
2016

August 18

Arconic settles legal claims for $20 million and an agreement to lock up the vote of approximately 8.7 million shares of Arconic common stock for a period of two years. This Secret August Voting Lock-Up requires the former owner of Firth Rixson to vote any shares of Arconic common stock held as of the March 1st, 2017 record date according to Dr. Kleinfeld’s interests at the 2017 Annual Meeting. In entering into the Secret August Voting Lock-Up the day after the August 17th filing of a proxy statement for the reverse stock split, it appears Arconic sought to avoid disclosure of the vote-buying transaction.

October 5

Arconic shareholders approve the reverse stock split. There is no disclosure of the Secret August Voting Lock-Up. Disclosure also not provided in subsequent 10-Q, 10-K, or other regulatory filings.
2017

March 13

After the record date for the 2017 Annual Meeting passes, precluding shareholders from buying shares out from under the Secret August Voting Lock-Up, Arconic seeks to bury its disclosure of the agreement in a two sentence paragraph on page 36 of a 135 page regulatory filing.

March 16

Elliott demands answers and accountability, asking Arconic’s board for information regarding who negotiated and approved this deal and why it was concealed for seven months.

March 20

Arconic waives the Secret August Voting Lock-Up, but refuses to provide important details about the agreement or hold anyone accountable. Arconic claims that it did not previously disclose the agreement as the Company did not know whether or not the Seller of Firth Rixson was a shareholder as of the record date, notwithstanding the fact that one of the Company’s own board members is affiliated with the Firth Rixson Seller and the agreement was signed two weeks after the record date for the reverse stock split, which under the Company’s own logic should have mandated disclosure of the agreement.

March 16 – 27

Arconic refuses to comply with transparency request.

March 27

Elliott sends letter to Arconic’s board and management in response to the Company’s refusal to comply with the information request and inquiries of other shareholders and asks: What is the Company trying to hide?

March 28 - Present

Company continues to stonewall, refusing to provide shareholders with information relating to the cost and negotiation of the Secret August Voting Lock-up or even a copy of the agreement.

Add your name below if you agree that the Board of Arconic is in desperate need of change:

Petition

We, the undersigned, are concerned that the management of Arconic Inc. appears to have used potentially valuable claims to obtain a voting agreement that would serve to entrench the Board and/or management.

Legal claims are assets of the Company and, by extension, its shareholders. The trade of valuable corporate assets in connection with a commercial transaction in exchange for a voting agreement promoting the entrenchment of the Board and/or management is contrary to the basic principles of good corporate governance and should not be tolerated by any Board of Directors.

We hereby call on the Board of Arconic to A) promptly and publicly disclose any and all information relating to the voting agreement in question, and B) dismiss anyone involved in devising, authorizing and/or hiding this agreement from Arconic shareholders.

Additional Resources

April 5, 2017
The Secret August Voting Lock-Up Explained Infographic

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