Arconic’s Board of Directors Responds to Elliott’s Continued Misleading Claims

May 9, 2017

Arconic’s Director Slate Brings More Relevant Skills, Leadership Experience and Industry Expertise

Vote “FOR” the Company’s Nominees on the NEW WHITE Proxy Card

The Board of Directors of Arconic (NYSE: ARNC) today issued the below
letter to shareholders in response to the latest letter issued by
Elliott Management (“Elliott”). Additional information, including the
letter to shareholders and supplemental proxy materials, are available

The Company urges shareholders to vote “FOR” the Company’s new slate of
five director nominees and governance proposals on the NEW WHITE proxy

The full text of the letter follows:

Dear Fellow Shareholders:

The Arconic 2017 Annual Meeting of Shareholders is fast approaching, and
we are writing to ask you to vote for the slate of director candidates
nominated by the Arconic Board of Directors by using the NEW WHITE proxy

Earlier this week, Elliott Management issued its latest letter in the
ongoing proxy contest, which is essentially a compilation of the same
misleading claims and unfounded allegations that have characterized its
months-long attack on Arconic’s Board and management. Elliott’s most
recent letter really boils down to a simple proposition with three
elements: Arconic has the wrong strategy, real change is needed, and
Elliott’s director nominees offer the best path to real change. Elliott
has advocated each of these three elements with disingenuous rhetoric,
but each is completely wrong.

We urge shareholders to apply their business judgment and experience in
giving Elliott’s assertions a reality check based on the facts and the
specific voting decisions that shareholders will make at Arconic’s 2017
Annual Meeting on May 25, 2017.

First Elliot Assertion: “Arconic Has The Wrong
Business Strategy”

The Board’s strategic view for Arconic is straightforward: we believe
that Arconic will maximize value for shareholders through differentiated
innovation and close strategic partnerships with our key customers.
Arconic seeks to add value in these partnerships and to get paid
appropriately for that value added. We believe this is a higher-return,
long-term industrial strategy than the more commoditized,
build-to-print strategy that Elliott, its nominees and its CEO candidate
have advocated. This type of differentiated, innovation-led strategy is
not novel – many of the best U.S. advanced manufacturing companies have
generated outstanding shareholder returns through this path. We have
concretely illustrated the implications of our strategic view by
publishing a three-year financial plan which includes double-digit
earnings growth and a substantial increase in returns on capital.
Multiple independent research analysts have noted that Arconic’s plan
sets ambitious targets.

If achieved, we believe that this plan’s value creation for shareholders
will be significant. In recruiting a world-class permanent CEO, our
primary focus will be on attracting a leader who agrees that Arconic can
create this type of substantial incremental value for shareholders over
the next few years and over the long term.

Second Elliott Assertion: “Real Change Is

To this very misplaced assertion, we answer with the facts: real change
– dramatic, constructive, value-creating change – has been underway for
some time and will continue under your Board and its director nominees.

Your Board has taken or announced a broad range of actions to position
Arconic for success as a new standalone public company, including:

  • Intensive work pre-separation to ensure the timely and successful
    launch of both Arconic and Alcoa Corp. as separate companies in
    November 2016.
  • Substantial refreshment of the Board itself (seven of the 11 directors
    currently serving on the Board have joined within the past 16 months).
  • Initiating a wide range of governance enhancements, including the
    formation of a Finance Committee, focused on optimizing capital
    allocation, and the adoption of proxy access.
  • Streamlining our executive compensation program to align it with core
    metrics (such as RONA, margin improvement and earnings growth) that
    directly drive improved shareholder value.

Your Board is committed to aggressively driving constructive change that
creates shareholder value – both near- and longer-term – and has
demonstrated that it has zero interest in sitting still, “entrenching”
itself or any other Elliott-asserted clichés that fly in the face of the
reality at Arconic.

Third Elliott Assertion: “Elliott Nominees
Offer The Best Path to Real Change”

The fact is that both Arconic’s slate and Elliott’s slate consist only
of directors who are or will be new to Arconic within the past 16
months. Notwithstanding Elliott’s focus on the past, the only decision
being contested at the 2017 Annual Meeting is the vote between Arconic’s
director nominees and Elliott’s director nominees. We welcome a detailed
review by shareholders of the two slates, because we believe the Arconic
slate brings far more relevant skills, leadership experience and global
aerospace-industry expertise. Our nominees include:

  • Arconic’s Interim CEO, who previously ran a $15 billion global
    commercial and military aircraft engine company, and a major Arconic
  • Arconic’s Audit Committee Chair, who previously served as CFO of two
    different aerospace suppliers, and who was nominated by Elliott in
  • Arconic’s Cybersecurity Subcommittee Chair, an aerospace engineer and
    innovation expert who serves as the Board’s cybersecurity expert.
  • The former head of Boeing’s Commercial Airplanes business and, prior
    to that, leader of Boeing’s Integrated Defense Systems business.
  • The first female four-star general in U.S. Air Force history, who was
    responsible for procurement for the U.S. Air Force and oversaw a
    significant restructuring of the Air Force Materiel Command to improve

We believe that all of Arconic’s nominees are exceptionally
well-qualified and bring the critical skills and experience needed to
drive further constructive change at Arconic and value creation for its

Without the facts on its side, Elliott has resorted to its well-worn
playbook of distortions and diversions. Consider just a few examples of
how Elliott’s claims compare to the facts:

          Elliott Claim     The Facts
“[T]he Board is involved. But Elliott is committed.”


“Elliott’s focus is very much long-term oriented.”


Arconic’s directors have
real commitments
– in the form of fiduciary duties

– to the Company’s
shareholders. Elliott, by contrast, has no commitment to Arconic’s
other shareholders, and no commitment to the long-term success of
the Company. While Elliott is indeed a significant shareholder and
has an economic interest in Arconic, it has made no commitment to
maintain its shareholding for any period of time. In fact, during
settlement negotiations,
Elliott insisted
on having the unfettered ability to sell its shares at any time

demanding that Arconic file a registration statement to facilitate
its sales.

Elliott is engaging in “responsible” and “constructive” activism.


Elliott’s proxy contest “is a last resort, not a preferred course.”


Elliott has spent the last 15 weeks
running one of the most aggressive campaigns of personal
destruction the capital markets have witnessed

, seeking
to humiliate and destroy Arconic’s former CEO, and now its
directors, to win at any cost. And
has twice reneged on settlement agreements and insisted on
continuing its proxy contest

even after its principal
objective (a change in Arconic’s CEO) occurred, and even after the
Board made a reasonable proposal to appoint two of Elliott’s
director nominees, which Elliott promptly rejected.

The Board has engaged in a “determined defense for years” of its
legacy governance regime.

Arconic, and Alcoa before it, have spent years pursuing governance
reforms, including implementing proxy access, enhancing the
Company’s executive compensation programs and submitting past
proposals to declassify the Board and eliminate supermajority
provisions. The reality is that Arconic has been saddled with
legacy supermajority voting requirements that limit the Board’s
ability to make desirable governance changes.


Moreover, the
Board has made clear that
it will provide for all directors to be subject to annual
elections beginning in 2018

, and if the governance
proposals are not approved at the 2017 Annual Meeting, Arconic
intends to
pursue reincorporation as soon
as practical

. The Board decided not to pursue
reincorporation while the separation was pending because it could
have seriously jeopardized the timing of the separation
(particularly if pro forma financial statements would have been
required by the Securities and Exchange Commission). The Board
also considered whether it would be feasible to submit a
reincorporation proposal at the upcoming annual meeting, but the
need for a merger proxy statement could have resulted in a longer
SEC review process for Arconic’s proxy materials and therefore
substantially impacted its ability to compete with Elliott for
shareholder support in the proxy contest.


In any event, none of Arconic’s nominees have been on the Board
“for years.” They represent just as much change as Elliott’s

The “shareholder-friendly corporate governance practices” of Alcoa
Corp. provide a basis to criticize Arconic’s governance.

Alcoa Corp., which, like Arconic, launched in November 2016, is
incorporated in Delaware and has annual director elections. It was
Alcoa Inc. directors, seven of whom
now serve on the Arconic Board, that created these Alcoa Corp.
governance features, in keeping with the Board’s commitment to
corporate governance best practices

. Pat Russo,
Arconic’s current interim Chair, was the chair of Alcoa Inc.’s
governance and nominating committee and accordingly played a
critical role in determining the corporate governance profile of
Alcoa Corp.

Arconic is seeking to limit its next CEO’s “freedom to operate” and
will “tie[] any new CEO’s hands.”

Arconic has begun the process of selecting a world-class candidate
to serve as the new CEO, and the Board is committed to ensuring
that Arconic’s next leader has the appropriate authority and role
in the Company’s operations, financial planning and business
strategy. The Board resisted
attempt to impose an “Operations Committee,” consisting of a
majority of Elliott’s designated nominees and with a mandate
dictated by Elliott, because it could seriously undermine
Arconic’s efforts to recruit the best possible CEO

candidates may be unlikely to sign up for micromanagement by a
Board committee with an agenda delineated by one shareholder.

“[T]he Board had no credible succession strategy.”    

Elliott has manufactured a claim about inadequate succession
planning because it cannot attack the
of David Hess as Arconic’s highly qualified interim CEO

Mr. Hess has been a stabilizing force during this period of

Moreover, considerable succession-planning efforts were recently
required for the separation of Alcoa Inc. into Arconic and Alcoa
Corp., which involved the recruitment or promotion of several
executive candidates in order to ensure both companies had
top-notch, experienced management teams, including an executive
ready to lead a large public company, like Alcoa Corp.

The Board has inappropriately “rewarded” the interim Chair with “an
immediate eight-fold increase in compensation.”

Elliott’s math is wrong
grossly overstates the interim increase in Ms. Russo’s total
director compensation.

Arconic should be criticized for “the returns which have been
earned on [its] investments.”

Elliott has focused on historical Alcoa Inc. returns that were
impacted by pre-2008 capital commitments in the upstream business
combined with the low commodity price environment. In fact, a
increase in Return On Net Assets has been achieved in Arconic’s
businesses, and Arconic has implemented an exacting capital
expenditure approval process with strict growth investment criteria


“[C]hange is not simply about bringing in new people.”    

The Board has brought in new directors and nominees – nine in the
last 16 months. But Arconic’s changes have not been only about
directors; it has also
shed businesses,
acquired others, split the company to create two independent
firms, made a swift and decisive change in leadership and
implemented a revised executive compensation program aligned to
value creation specific to Arconic’s business


Shareholders should not be concerned about Elliott’s ever-increasing
demands at Arconic because it “hasn’t nominated any employee or
affiliate” and its nominees “will receive no ongoing compensation
from Elliott.”

The Board is charged with acting on behalf of all shareholders,
having one 13% shareholder designate
a majority of the Board and direct the selection of the new CEO is
not consistent with good governance that serves the best interests
of all shareholders


While its nominees may not be on its payroll,
has failed to mention that it has proposed a CEO candidate who it
has agreed to pay approximately $28 million over the course of the
next two years


The Arconic Board has triggered a “poison put” whose “sole plausible
purpose is to entrench management and the Board” despite having “the
right to unilaterally amend or eliminate the provision at any time
it wanted.”

Arconic’s rabbi trust is not a poison put –
liabilities have been created, accelerated or increased

as a result of the Board’s determination. And the rabbi trust has
nothing to do with entrenchment – its sole purpose is to
aside funds to protect the Company’s pre-existing benefit
obligations to its employees and retirees, which are already
reflected on Arconic’s balance sheet

, from
mismanagement following a change in control. In fact, a court
recently found “no evidence” that the Arconic rabbi trust was
“chilling the votes of any of the shareholders.”

After Elliott launched its proxy contest, management identified
the potential change in control trigger in the trust agreement
and, promptly after this was brought to the Board’s attention, the
Board took action to ensure full disclosure of the trust agreement.

Moreover, Elliott’s claim that Arconic had a clear right to amend
the trust agreement at any time is false.

Arconic engaged in “vote-buying” and “fail[ed] to make proper
disclosure” of the voting commitment entered into with Oak Hill in
August 2016 to “tamper with the shareholder franchise.”

The voting commitment was not “bought” because no additional value
was given by Arconic for it. The Oak Hill agreement was not filed
because it was not material and contained customary
confidentiality restrictions which continue to prohibit public


Elliott conveniently fails to mention that it has entered into
numerous voting commitments – including as part of Alcoa Inc.’s
settlement agreement with Elliott last year.


Most importantly, in the context of the current proxy contest, the
Board determined to waive the voting commitment promptly after it
became aware of it, in order to
full participation by every shareholder in the contested election



Despite Elliott’s best efforts to paint a picture of a company in
trouble and a Board in need of change, the image they have created does
not bear any semblance to the reality at Arconic. Your Board has
initiated a number of changes – both in the Company itself and in its
own composition. We have recently completed a successful separation
transaction and strong first quarter as an independent company, and a
majority of our directors are nearly brand new to the Company. Your
Board is unanimous in opposing Elliott’s campaign and believes Elliott’s
suggestions are misleading and would jeopardize the value of your
investment in Arconic.

We ask that you join us in looking to the future, and
on the NEW WHITE card for the Board’s recommended nominees

who we believe are the most qualified candidates for election at the
2017 Annual Meeting and who will bring the right kind of change to


The Board of Directors of Arconic Inc.

About Arconic

Arconic (NYSE: ARNC) creates breakthrough products that shape
industries. Working in close partnership with our customers, we solve
complex engineering challenges to transform the way we fly, drive, build
and power. Through the ingenuity of our people and cutting-edge advanced
manufacturing techniques, we deliver these products at a quality and
efficiency that ensure customer success and shareholder value. For more
Follow @arconic: Twitter,
and YouTube.

Dissemination of Company Information

Arconic intends to make future announcements regarding Company
developments and financial performance through its website at

Forward–Looking Statements

This communication contains statements that relate to future events and
expectations and as such constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include those containing such words as
“anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,”
“guidance,” “goal,” “intends,” “may,” “outlook,” “plans,” “projects,”
“seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of
similar meaning. All statements that reflect Arconic’s expectations,
assumptions or projections about the future, other than statements of
historical fact, are forward-looking statements, including, without
limitation, forecasts relating to the growth of end markets and
potential share gains; statements and guidance regarding future
financial results or operating performance; and statements about
Arconic’s strategies, outlook, business and financial prospects.
Forward-looking statements are not guarantees of future performance, and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of risks
and uncertainties, including, but not limited to: (a) deterioration in
global economic and financial market conditions generally; (b)
unfavorable changes in the markets served by Arconic; (c) the inability
to achieve the level of revenue growth, cash generation, cost savings,
improvement in profitability and margins, fiscal discipline, or
strengthening of competitiveness and operations anticipated from
restructuring programs and productivity improvement, cash
sustainability, technology advancements, and other initiatives; (d)
changes in discount rates or investment returns on pension assets; (e)
Arconic’s inability to realize expected benefits, in each case as
planned and by targeted completion dates, from acquisitions,
divestitures, facility closures, curtailments, expansions, or joint
ventures; (f) the impact of cyber attacks and potential information
technology or data security breaches; (g) political, economic, and
regulatory risks in the countries in which Arconic operates or sells
products; (h) the outcome of contingencies, including legal proceedings,
government or regulatory investigations, and environmental remediation;
and (i) the other risk factors discussed in Arconic’s Form 10-K for the
year ended December 31, 2016, and other reports filed with the U.S.
Securities and Exchange Commission (SEC). Arconic disclaims any
obligation to update publicly any forward-looking statements, whether in
response to new information, future events or otherwise, except as
required by applicable law. Market projections are subject to the risks
discussed above and other risks in the market.

Investor Contact
Patricia Figueroa, 212-836-2758
Media Contact
Shona Sabnis, 212-836-2626