Thyssenkrupp to split into two, and investors love it
The restructuring will be a major change for Thyssenkrupp after months of turmoil sparked by executive resignations, pressure from activist investors and losses at its industrial division
Thyssenkrupp is planning to split into two companies, separating its industrial and materials divisions in the biggest overhaul of the German conglomerate in decades.
One company, called Thyssenkrupp Industrials, will combine the elevator business, automotive supplies and plant construction. The other, called Thyssenkrupp Materials, will run steel, materials trading and steel-related processing operations.
The shares soared as much as 17% in German trading, the biggest intraday gain in a decade.
“This makes perfect sense,” said Christian Georges, an analyst at Societe Generale.
The restructuring would be a major change for Thyssenkrupp, once an icon of German industrial might, following months of turmoil sparked by executive resignations, pressure from activist investors and losses at its industrial division.
Shareholders including Cevian Capital have blamed an overly complicated business structure for Thyssenkrupp’s weak performance, and said the company needs to find “the right structure” to be competitive. The company still lacks a permanent chair and CEO.
Thyssenkrupp’s largest shareholder, the Alfried Krupp von Bohlen und Halbach Foundation, voiced its initial support for the plan, saying, “the foundation is duty-bound to do what’s best for the company and won’t rule out any option that finds a good balance between keeping the firm competitive on a sustainable basis and secures jobs for the future”.
The separation would happen via a spin-off and give investors shares in both companies, which will trade on public exchanges, Thyssenkrupp said in a media release on Thursday.
“Investors who focus on industrial goods are interested in stable cash flows and attractive growth prospects,” the company said. “The materials businesses, on the other hand, are of interest to investors who are more interested in cyclical business and consolidation.”
Cevian, Thyssenkrupp’s second-largest shareholder, said that it supported the decision.
“This will reduce complexity, promote entrepreneurial freedom and agility,” said Lars Forberg, co-founder of Cevian. “This strategic decision is an important step to tackle the underperformance of the past.”
With Carolynn Look
Bloomberg