The deep end

ThyssenKrupp considers selling ship unit after losing contract

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Could you float us a contract? Source: DPA

Steel and engineering group ThyssenKrupp is readying the sale of its boatbuilding activities after it failed to advance in the tender of a new German warship, Handelsblatt has learned. Missing out on a contract for the MKS 180 multiuse corvette will mean ThyssenKrupp Marine Systems will have to forego €3.5 billion in revenue.

The shortfall not only puts a perilous hole in Marine Systems’ bow, it also eliminates it from winning follow-on contracts from other countries. Egypt, for example, was expected to order MKS-180s from ThyssenKrupp Marine Systems, once the go-to boatbuilder for Germany’s navy. “No navy in the world would order from a company that doesn’t also supply its domestic military,” a manager of a rival boatyard said. “Egypt will now give the contract for building frigates to the French Naval Group.”

The inability of ThyssenKrupp CEO Heinrich Hiesinger to keep the company’s boat division afloat is likely to ratchet up pressure from investors unhappy with the company’s direction. New York hedge fund Elliott has said ThyssenKrupp’s headquarters is bloated and has criticized Mr. Hiesinger as having done little to get the company on track. “If the German national team hadn’t won a game for so long, would it still have the same coach?” a manager at Elliott said in a Handelsblatt interview this week.

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Elliott currently owns less than 3 percent of ThyssenKrupp but could link up with fellow activist investor Cevian, which holds 18 percent, to force a change. Cevian has pushed to sell the shipmaker.

ThyssenKrupp is already in talks with rivals including German Naval Yards about a partnership that could lead to a stake disposal or even an outright sale, company sources said. If no buyer can be found, the shipbuilding unit could be closed, leading to the loss of about 1,000 of the division’s total 6,000 workers. ThyssenKrupp Marine Systems also builds submarines, but that unit could also be jeopardized by the loss of the above-water unit.

Mr. Hiesinger has tried to sell the shipmaking business before. In 2014 he was in discussions with defense company Rheinmetall, but the talks faltered on price.

Andrew Bulkeley is an editor for Handelsblatt Global in Berlin. Handelsblatt reporters Martin Murphy and Donata Riedel contributed to this report. To contact the author: a.bulkeley@handelsblattgroup.com

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