ARNC Arconic Corporation

Alcoa Inc. on Monday said it will add three directors to its board, reaching a deal with activist Elliott Management Corp. in which the hedge fund will support the aluminum company's slate of directors up for election this year.

The company said it will name Ulrich "Rick" Schmidt, John Plant and Sean Mahoney to serve on the board, effective Friday. The additions expand the board to 15 members.

Alcoa said the trio will add aerospace and automotive experience to the board as Alcoa prepares to split into two companies.

With the additions, Elliott, which owns roughly 7.5% of Alcoa stock, has agreed to support the company's slate of nominees at its 2016 shareholder meeting.

Mr. Mahoney will be added to the class of directors whose term expires in 2016, while Mr. Schmidt and Mr. Plant will be added to the class of directors whose terms expire in 2017 and 2018, respectively.

"As we prepare to separate into two strong companies, we have been actively working to ensure each has a world-class board of directors focused on creating shareholder value," said Alcoa Chief Executive Klaus Kleinfeld, who noted the new directors will bring "valuable skills highly relevant to the markets we serve, including aerospace and automotive."

Dave Miller, senior portfolio manager at Elliott, said the hedge fund believes Alcoa is taking the right steps.

Representatives of Elliott, a New York hedge fund founded by Paul Singer, have been meeting with senior Alcoa executives, including Mr. Kleinfeld. Elliott's determination that Alcoa is the most undervalued of U.S. metals and mining companies drove the hedge fund's initial investment in Alcoa, people familiar with the matter have told The Wall Street Journal.

Prices for raw aluminum have fallen sharply since 2011, a decline that Alcoa and Elliott believe masks the prosperity of the company's aerospace and auto businesses. That decline also was behind the aluminum company's announcement in late September that it would spin off its more profitable and diverse parts-making units. The deal is expected to close in the second half of the year, with Alcoa shareholders owning all shares outstanding of both companies.

Roy Harvey, currently executive vice president and president of global primary products at Alcoa, will serve as chief executive of the new upstream company, which will include the raw-metals business and keep the Alcoa name.

Mr. Kleinfeld, meanwhile, will lead the so-called "value-add" company as chairman and CEO. He will also serve as chairman of the upstream company at the start.

Shares of Alcoa declined 1.4% in early trading to $7.19.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

February 01, 2016 10:15 ET (15:15 GMT)

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