February 1, 2019 / 9:13 AM / in 17 days

Thyssenkrupp boss defends breakup as scepticism persists

BOCHUM, Germany (Reuters) - Thyssenkrupp boss Guido Kerkhoff sought on Friday to drum up support among small shareholders for a plan to break up the steel-to-elevators group, facing criticism about the lack of concrete details over how the move will lead to better results.

Guido Kerkhoff, CEO of steelmaker Thyssenkrupp AG, is seen before the annual shareholders meeting in Bochum, Germany, February 1, 2019. REUTERS/Wolfgang Rattay

Kerkhoff, who became chief executive after a tumultuous summer that saw the resignation of both the CEO and chairman, is planning to spin off Thyssenkrupp’s elevators, car parts and plant engineering units to become more efficient.

Shareholders are expected to vote on the plans at the next general meeting in a year’s time and are awaiting further details on the transaction - including the organizational set-up and capital markets day - during the course of the year.

“This gives us the strategic clarity we urgently need. In this way, we enable the businesses to develop faster and more dynamically,” Kerkhoff, 51, told shareholders at the group’s annual general meeting on Friday.

Shareholders approved the appointment of Martina Merz, who will become the company’s new supervisory board chairwoman. About 13 percent of the group’s shareholders voted against her at the meeting after criticism about the number of board positions she holds.

The spin-off group will be separately listed and renamed Thyssenkrupp Industrials, while the remaining units - materials trading, shipbuilding and a 50 percent stake in a planned joint venture with Tata Steel, will be called Thyssenkrupp Materials.

Thyssenkrupp shares have fallen 27 percent since the landmark move was announced in September, as some investors questioned whether the breakup of the group will really address the company’s operational problems.

NOT ENOUGH

In his restructuring efforts, Kerkhoff can count on the support of his two biggest shareholders - the Alfried Krupp von Bohlen and Halbach foundation and investor Cevian - which jointly hold 39 percent of the group.

Kerkhoff said that the breakup plans were also backed by Harris Associates and Singapore’s sovereign wealth fund GIC, the group’s third and fourth-largest shareholders, which disclosed stakes at the end of last year.

“It’s not enough to break up the group in a materials business and a capital goods business and the belief that things will get better on their own,” said Winfried Mathes of Deka Investment, a top-20 shareholder.

“What speaks against a holding structure with five independent companies?”

DWS, Thyssenkrupp’s 11th-biggest shareholder, had a day earlier called on the group’s management to raise profit margins and said it had reduced its actively managed position in the company following two profit warnings last year.

It still said the split was a good idea in principle.

Slideshow (6 Images)

Shares in Thyssenkrupp closed 2.7 higher on Friday, the biggest gainers among German blue-chip stocks, after Kerkhoff also said that first-quarter results, to be presented on Feb. 12, would fall, but will be in line with expectations.

“People are relieved that the results are in line with expectations and the situation hasn’t gotten worse,” an equity trader said.

($1 = 0.8730 euros)

Editing by Michelle Martin/Elaine Hardcastle/Susan Fenton

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