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Elliot Management Takes 6.4 Percent Stake in Alcoa, Eyes Opportunities to Improve Company's Profit Margins

Nov 25, 2015 01:00 AM EST | By Jean-Claude Arnobit
Elliot Management Corporation, Alcoa Inc., acquire stake
Elliot Management Takes 6.4% Stake in Alcoa, Sees Opportunity for the Company to Improve its Profit Margins
(Photo : Jeff Swensen | Getty Images News)

Elliot Management Corporation has disclosed that they have taken a 6.4 percent stake in Alcoa Inc., according to a report from Reuters.

Paul Singer, the activist investor that runs Elliot Management, sees an opportunity for the aluminum producer to improve its profit margin.

Monica Orbe, a spokeswoman for Alcoa, told Reuters that Elliot Management advised them of their ownership of shares "several weeks ago."

She said that Elliot told them about their ownership "shortly after we announced the separation of our upstream and value-add businesses."

Orbe adds to Reuters that Alcoa has "had constructive discussions with Elliot Management" following the hedge fund's disclosure to them.

Reuters adds that Alcoa said in September that it plans to split itself into two companies, separating the faster-growing plane and car plants business from the traditional smelting operations.

The split comes as shareholders are seeking higher returns as commodity prices continue to slump.

The Financial Times said that Elliot Management has praised Alcoa's move to split into two companies in their filing.

The hedge fund said that Alcoa's move is set to "create value substantially above the current share price."

The Financial Times adds that Alcoa's shares have fallen 48 percent over the past 12 months.

Commodity aluminum also has a grim market as it dropped by 30 percent on the London Metal Exchange over the same period.

The Financial Times adds that Alcoa has also been building up its plane and car plants business with a series of acquisitions.

Alcoa has acquired RTI International Metal, a global supplier of titanium and specialty metal products, in March and Firth Rixson, a leader in aerospace jet components, in November last year.

The Financial Times said that, though Elliot Management has been warm about Alcoa's strategy, it still left an option to be cooler on the aluminum maker's management in the future.

Other investors, though, may have overlooked an opportunity if Elliot Management turns out to be right with its argument.

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