A steal

Steelmaker ThyssenKrupp open to acquisitions

Dr. Heinrich Hiesinger, Vorstandsvorsitzender der thyssenkrupp AG
Battling on all fronts. Source: Dirk Hoppe for Handelsblatt

As Heinrich Hiesinger maps out the next steps for his company, not much about his plans has leaked out so far.

ThyssenKrupp, one of Germany’s largest and most complex organizations, is a sprawling steel and engineering giant. There has long been speculation that Mr. Heisinger could sell the materials distribution and trading division. Now, sources told Handelsblatt he might bolster Thyssen’s industrial divisions with acquisitions.

He wants to pivot away from the volatile business of producing steel and focus instead on making high-tech, specialized industrial goods like elevators, chemical plants and parts for the car industry. New acquisitions could speed that process along.

After years of financial torpor, Mr. Hiesinger and his advisors are trying to prepare ThyssenKrupp for the future. The strongest indication that the company’s perpetual crisis mode could finally be over is this openness towards acquisitions.

To realize his plans, Mr. Hiesinger will have to win over ThyssenKrupp's investors. That may be easier said than done.

Of course, such purchases would only be possible if ThyssenKrupp manages to spin off the European steel business. The company plans to forge a joint venture with Tata Steel Europe in order to put more distance between itself and conventional steelmaking. That would not only shield it from market volatility but also significantly lighten its burden of debt.

“That would give us room for acquisitions,” said one manager who spoke to Handelsblatt.

In the seven years since Mr. Hiesinger took over as chief executive, ThyssenKrupp’s shares have fallen by about a fifth. During the same period, the DAX stock market index has risen by 87 percent.

But ThyssenKrupp has been sluggish about restructuring. And even though the group exceeded average operating profits among German companies in the first quarter, logging €444 million ($549 million)—beating the €436 million mean—its shares still fell due to liquidity problems. Meanwhile, profits at its European steel division jumped to €160 million, a 500-percent increase attributed to higher steel prices.

New acquisitions could help strengthen ThyssenKrupp’s industrial divisions, which are among its most profitable. The department which makes elevators, for instance, the group’s strongest earner, recently reported a 3-percent jump in profit for the first quarter. It rose to €220 million compared to a year ago.

Mr. Hiesinger and ThyssenKrupp plan to reconsider the strategy in May, which is when the company’s joint steel venture with Tata should be finalized.

To fully realize his new plans, however, Mr. Hiesinger will have to win over ThyssenKrupp’s investors. And that may be easier said than done.

One investor, Lars Förberg, has long been a thorn in Mr. Hiesinger’s side. His company, Cevian Capital, holds an 18-percent stake in ThyssenKrupp. That makes it the conglomerate’s second-largest shareholder. For Mr. Förberg, a mere shift in the company’s focus does not go far enough. “ThyssenKrupp needs a radical change,” he told Handelsblatt in an interview.

Mr. Förberg wants ThyssenKrupp’s individual sectors to operate much more independently than they have to date. That would make it easier to sell standalone divisions or take them public, he argued.

But according to the activist investor’s detractors, including Mr. Hiesinger and ThyssenKrupp’s supervisory board chairman, Ulrich Lehner, that would mean the effective disintegration of an iconic German company that has been around for centuries.

For now, Mr. Hiesinger and Mr. Lehner have the support of the Alfried Krupp von Bohlen and Halbach Foundation, Thyssenkrupp’s largest shareholder with a 21 percent stake. But Mr. Förberg, with Cevian’s 18 percent, is a mighty opponent.

So far, no other investors have latched onto Mr. Förberg’s calls. But that could all change if Mr. Hiesinger’s plan doesn’t unfold the way he intends.

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Martin Murphy writes about ThyssenKrupp for Handelsblatt, and Martin Wocher covers the steel industry. To contact the authors: m.murphy@handelsblattgroup.com, m.wocher@handelsblattgroup.com

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