FRANKFURT Germany's ThyssenKrupp (TKAG.DE) plans to raise over 1 billion euros ($1.3 billion) in a share sale to bolster its finances after winning over its biggest investor to the plan, a newspaper reported, sending the steelmaker's stock sliding.
ThyssenKrupp has struggled to reduce its debts with a flagging European economy hitting demand for steel, and has suffered massive losses from a project in the Americas.
The firm has reportedly shied away from raising money via a share issue because of opposition from its biggest investor, the Alfried Krupp von Bohlen und Halbach Foundation, which would see its 25.3 percent stake cut if it did not take part in the sale.
However, Germany's Handelsblatt newspaper on Tuesday cited unidentified company sources as saying Chief Executive Heinrich Hiesinger had convinced the foundation's 99-year-old patriarch, Berthold Beitz, to drop his opposition, and that a share sale could come this financial year, which ends in September.
A spokesman for ThyssenKrupp declined to comment, as did the foundation. As recently as January, the company said it did not need a capital increase.
At 1105 GMT, ThyssenKrupp shares were down 7.1 percent at 17.06 euros, the biggest drop by a European blue-chip stock .FTEU3.
Last year, ThyssenKrupp posted a 4.7-billion-euro loss due to a writedown on the value of its Steel Americas project. Net debt also climbed to 5.8 billion euros from 3.6 billion and the group's equity capital shrank to 11.8 percent of its total assets, from 23.8 percent.
"Given the weak situation of the balance sheet a capital hike would make sense," DZ Bank analyst Dirk Schlamp said, adding he expected further writedown on Steel Americas.
ThyssenKrupp's supervisory board held an extraordinary meeting on Tuesday at which it elected former Henkel (HNKG_p.DE) chief executive Ulrich Lehner as its new chairman, but there was no indication it discussed capital measures.
Lehner replaces Gerhard Cromme, whom Beitz ousted after he came under fire for not stopping the Steel Americas project when problems there started and for later putting all the blame on management.
"It was a shame, it was very painful," Beitz told German newspaper Sueddeutsche Zeitung in an interview published this week. "I kept waking up at night and thought about it. But it had to be done. The good of the company comes first."
Beitz also said he would "not block any step that is for the good of the company", without being more specific.
($1 = 0.7717 euros)
(Editing by Chris Gallagher and Mark Potter)