* Sweden-based investor sees ThyssenKrupp as undervalued
* Cevian says supports management's strategy
* ThyssenKrupp CEO Hiesinger welcomes investment
* ThyssenKrupp shares rise 3.5 percent
By Maria Sheahan and Matthias Inverardi
FRANKFURT/DUESSELDORF, Sept 25 Activist investor
Cevian has raised its stake in ThyssenKrupp to 5.2
percent, in a move that was welcomed by the German steelmaker's
CEO who is trying to steer the loss-making firm into new
"With Cevian Capital as a new investor we are gaining a
renowned European major shareholder who also has extensive
industrial experience in Germany," ThyssenKrupp Chief Executive
Heinrich Hiesinger said.
Shares in ThyssenKrupp rose as much as 5.7 percent after
Sweden-based Cevian revealed its stake had increased from less
than 3 percent on Wednesday.
Hiesinger, who took over in 2011 is trying to extricate the
Essen, Germany-based company from a costly investment in a
Brazilian steel mill and shift the company away from its
traditional business into less cyclical products like elevators
Cevian backed management's strategy to shed non-core assets,
cut its cost base and shake up its management structure.
"The measures that ThyssenKrupp's management has initiated
as part of its strategic development programme are starting to
have an effect," Cevian Capital partner Jens Tischendorf said.
Pressure has been rising on ThyssenKrupp to seek cash from
shareholders as its finances have deteriorated.
ThyssenKrupp had net debt of 5.3 billion euros ($7.15
billion) at the end of June, and a decline in equity had caused
its gearing ratio - how much debt it has compared to equity - to
jump to 185.7 percent from 148.2 percent three months earlier.
That forced it to ask its banks to waive loan covenants it was
at risk of breaching next week.
The Krupp Foundation remains the firm's biggest shareholder,
with about 25 percent.
"It is a positive sign that there is an additional long-term
investor in ThyssenKrupp's shareholder structure," Commerzbank
analyst Ingo-Martin Schachel said.
Equity capital markets bankers said that any capital hike is
unlikely to come before ThyssenKrupp presents a solution for its
steel mills in the Americas.
ThyssenKrupp's stock has fallen 1.5 percent so far this
year, underperforming a 13.8 percent gain by Germany's blue-chip
It trades at 15.3 times 12-month forward earnings, a big
discount to fellow steelmaker ArcelorMittal's multiple
of 32.1, according to Thomson Reuters StarMine.
Cevian said it saw ThyssenKrupp as undervalued and was
convinced of its long-term potential. Activist investors such as
Cevian commonly buy shares in companies to push for sweeping
changes in the hope of raising the value of their holdings.
Cevian said it was not seeking representation on
ThyssenKrupp's supervisory board at the moment but left the door
open for future action.
"The move could fuel speculation on the break-up of
ThyssenKrupp," DZ Bank analyst Dirk Schlamp said. There has been
talk in the past that ThyssenKrupp could completely exit the
steel sector to focus on industrial equipment and services.
ThyssenKrupp's most pressing task is its year-long attempt
to sell its loss-making Steel Americas business, including the
Brazil plant. It has had to write down the value of that
business to 3.4 billion euros over the past year, from more than
7 billion euros.
"The company has recently made progress in its talks over
selling a U.S.-based mill and will likely keep its Brazilian
operations," a person familiar with the negotiations said on
Wednesday, adding it was unclear when a deal would be signed.
Commerzbank's Schachel said Cevian's involvement in other
companies had not proven to be disadvantageous for investors and
"Quite the opposite, there has generally been a sustainable
value accretion following Cevian's investment," he said.
Cevian pressed Finnish engineering group Metso to
spin off its pulp, paper and power unit and pushed U.S.
construction machinery maker Terex to raise its hostile
offer for Germany's Demag Cranes in 2011.
Shares in ThyssenKrupp were trading 3.5 percent higher at
18.11 euros by 1041 GMT, while the DAX was down 0.3 percent.
Cevian also owns around 19 percent of German industrial
services firm Bilfinger and earlier this year raised
its stake in Denmark's Danske Bank.