Elliott Management acquires 6.4% in aluminum producer Alcoa

Activist investor Elliott Management has acquired a 6.4-per cent stake in aluminum producer Alcoa, saying it believes shares of the company are significantly undervalued.

The move comes two months after the company's decided to split in two, spinning off its aerospace and car parts-making business from its raw-aluminum operations (See: Metals firm Alcoa to split into two publicly traded entities)

The purchase sent Alcoa's shares rising yesterday by 4.4 per cent to $9.07 on the New York Stock Exchange.

Elliott, which disclosed its stake in a regulatory filing, will be the second-biggest shareholder in Alcoa after investment manager Vanguard Group Inc, which holds an 8.21 per cent stake.

New York City-based Alcoa Inc is the world's third largest producer of aluminum, behind Rio Tinto Alcan and Rusal with annual sales $23.9 billion.

Alcoa, whose shares have plunged by 43 per cent since the beginning of the year and profit down by 70 per cent in the third quarter, has been struggling due to low prices and weak demand.

Alcoa's traditional smelting business had been suffering due a surplus in the market that has caused a slump in prices and deepened the industry's worst crisis in years.

At the same time, the company had been bullish on growth from higher-margin titanium and high-strength aluminium sales to the aerospace industry, with a growing order book for airplane production and renewed global spending on automobiles.

Airplane manufacturers had turned to lightweight titanium from aluminum, and automakers to new, strong aluminum alloys instead of high-strength steel to improve performance and increase efficiency.