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Elliott starts proxy fight with Arconic as it posts fourth-quarter loss

CHICAGO (Reuters) - Activist investor Elliott Management Corp on Tuesday launched a proxy fight against Arconic Inc ARNC.N, which makes engineered metal parts for the aerospace, automotive and other industries, campaigning for the ouster of the company's chief executive and saying it had a plan to boost the company's performance.

The news came after Arconic reported a quarterly net loss following the market close, caused by charges related to the company's separation from Alcoa Corp AA.N last November and said cost-cutting would help it boost margins in 2017.

Elliott, which manages funds that own 10.5 percent of common stock and equivalents of Arconic, has nominated five independent candidates to the board.

In a presentation Elliott said it could improve Arconic’s valuation to at least between $33 and $54 per share. The stock closed at $22.79 on Tuesday.

“We believe a change in CEO is needed for the Company to sustainably create maximum shareholder value,” the presentation says.

Elliott said it had engaged Larry Lawson, formerly CEO of Spirit AeroSystems Holdings Inc SPR.N, as a consultant and that it believes he should be a leading candidate for CEO of Arconic.

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New York-based Arconic said tax valuation allowance charges related to the split with Alcoa, plus restructuring and other costs were behind its fourth-quarter loss.

Alcoa retained the company’s legacy aluminum, alumina and bauxite smelting business, while Arconic focused on higher-end aluminum and titanium alloys used in planes and cars.

Arconic shares fell 2 percent in after-hours trading.

“In 2017 we are squarely focused on operational improvements, margin expansion, and capital efficiency to drive shareholder returns,” CEO Klaus Kleinfeld said in a statement. “We will continue to cut cost through productivity and corporate overhead reduction.”

The company said on Monday that Kleinfeld had the unanimous support of its board of directors despite reports some shareholders wanted to oust him.

When asked about those efforts, Kleinfeld said that Alcoa shareholders have seen returns of 21 percent since the split in November and Arconic shares have gained roughly 19 percent.

“It’s clearly been very successful in unleashing value,” he said.

Arconic said it expects revenue in the first quarter to range from $2.8 billion to $3 billion, and full-year 2017 revenue to be between $11.8 billion and $12.4 billion.

This would be flat to down versus revenue of $12.4 billion in 2016 and 2015.

Analysts have predicted full-year revenue for Arconic of $12.1 billion.

The company reported a fourth-quarter net loss of $1.2 billion, or $2.88 per share. Adjusted for one-time items, the company reported net income for the quarter of $71 million or 12 cents per share. Analysts had expected earnings per share on an adjusted basis of 13 cents.

Reporting By Nick Carey; Editing by Bill Rigby and Sandra Maler

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