ARNC Arconic Corporation

Hedge fund Elliott Management Corp. has increased its stake in Alcoa Inc. to 7.4%, reiterating its support of the lightweight-metals manufacturer's previously announced split.

In November, the hedge fund had accumulated at 6.4% stake in the company after its decision to spin off its more diverse parts-making business from its raw-aluminum operations.

According to a filing with the Securities and Exchange Commission, Elliott bought more Alcoa shares from mid-December through last week. In the filing, it noted that Alcoa shares "are dramatically undervalued by the public market" and that the spinoff "will create value substantially above the current share price."

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

Prices for raw aluminum have fallen sharply since 2011, a decline, Alcoa and Elliott believe, that masks the prosperity of the company's aerospace and auto businesses and 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 "for the critical initial phase, ensuring a smooth and effective transition," Alcoa has said.

Shares of Alcoa rose 4 cents to $6.91 in early trading.

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

(END) Dow Jones Newswires

January 25, 2016 10:45 ET (15:45 GMT)

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