Thyssenkrupp leadership vacuum fuels restructuring hopes
DUESSELDORF (Reuters) – Thyssenkrupp (TKAG.DE) shares bounced 8 percent on Tuesday, lifted by hopes of a deeper restructuring of the German submarines-to-elevators conglomerate after the chairman resigned, leaving the company in a leadership crisis.
Ulrich Lehner quit on Monday following a clash with the main shareholders, saying he was no longer able to safeguard the interests of key stakeholders, days after Chief Executive Heinrich Hiesinger quit.
Thyssenkrupp shares were trading at 22.12 euros, making it the leading stock on Germany’s 30-share DAX index .GDAXI which was little changed overall.
“A sharply worded resignation announcement from Dr. Lehner makes clear that aggressive restructuring may be in the cards, supporting our 33 euros sum of the parts based price target,” Jefferies analyst Seth Rosenfeld said in a note late on Monday.
“Thyssenkrupp is at a crossroads.”
The resignations of the two senior figures at the company reflect a power struggle among Thyssenkrupp’s management and shareholders which include a foundation that remains its largest shareholder and activist investors Cevian and Elliott.
Lehner had resisted calls to sell the elevators division and, in an interview with German paper Die Zeit this month, accused the activist shareholders of waging a campaign of “psychological terror.”
Lehner, 72, said in his resignation statement that he no longer enjoyed sufficient support to develop the company in the interest of its customers, employees and shareholders and would leave at the end of the month.
He called for a fundamental discussion with shareholders on the future of Thyssenkrupp but made clear that he was opposed to dismantling a company that employs 158,000 people.
“My decision may contribute to creating the necessary awareness with all concerned parties that a break-up of the company and the related loss of many jobs is not an option.”
Hiesinger and Lehner had championed a limited restructuring at Thyssenkrupp, merging Thyssenkrupp’s European steel assets with those of India’s Tata Steel (TISC.NS), in a deal sealed on June 30.
Activist shareholders have however demanded more far-reaching steps to raise performance at a time when conglomerates around the world, including General Electric (GE.N), have undertaken sweeping reforms to realize shareholder value.
Lehner’s resignation puts the spotlight on the Alfried Krupp von Bohlen und Halbach foundation, headed by Ursula Gather, a mathematics professor and university rector. It remains Thyssenkrupp’s largest shareholder with a 21 percent stake.
The Krupp foundation was set up in 1967 as a non-profit dedicated to the wider public good and to maintaining and developing the company, leaving the descendants of the founding family out of the picture.
The foundation held a 25 percent stake in Thyssenkrupp, formed in a merger in 1999, but lost its power to block major decisions in 2013 when Thyssenkrupp had to raise capital to cover losses from an ill-fated transatlantic expansion drive.
Shareholders urged the company to avoid a drawn out battle with activists led by Sweden’s Cevian Capital, which owns an 18 percent stake.
“The new supervisory board chairman must be chosen by consensus, anything else will only lead to conflict”, said Ingo Speich, a fund manager at Union Investment.
Speculation on who would succeed Lehner centered on Gather and Hans-Peter Keitel, boss of construction firm Hochtief (HOTG.DE) as well as former Deutsche Telekom chief executive Rene Obermann. All three are members of the Thyssenkrupp supervisory board.
WORKERS SPEAK OUT
Thyssenkrupp’s materials trading business is widely seen as a potential candidate for a sale, joint venture or listing, but the ousted management team had wanted other divisions, such as elevators, to remain a core part of the company.
Thyssenkrupp installed Guido Kerkhoff as acting chief executive but Hiesinger’s departure opens up more fundamental questions about the company.
“I respect Lehner’s decision, but I regret it,” said Wilhelm Segerath, head of the Thyssenkrupp works council and a senior official in the IG Metall industrial trade union.
Workers command half of the seats on Thyssenkrupp’s supervisory board. Together with Krupp foundation, workers have the power to block deeper restructuring moves.
Segerath called on the main shareholders to work together to develop Thyssenkrupp.
“There can be no break-up of the business,” he told Reuters.
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