Activist Cevian Says a Simpler Thyssenkrupp Could Soar 100%

(Bloomberg) -- Thyssenkrupp AG’s second-biggest shareholder said it expects the steelmaker will fix an overly complicated structure that’s to blame for poor investor returns.

The stock could double if the company wasn’t so complex, said Lars Forberg, a managing partner at Cevian Capital. Thyssenkrupp, one of Germany’s biggest industrial companies with a business spanning submarines and elevators, is an oversized conglomerate that needs to restructure, Forberg said in an interview on Bloomberg Television.

The shares jumped 3.8 percent to 26.14 euros in German trading on Friday. While the stock has rebounded in recent months, it’s still about 15 percent below levels from the start of 2011, when Chief Executive Officer Heinrich Hiesinger took the reins.

“Something is not working, and the root cause of that problem is the structure of the group,” Forberg said. We’re expecting a “very thorough review that will lead to a very thorough change.”

Thyssenkrupp is “surprised,” by Cevian’s public criticism, Hiesinger told shareholders at an annual general meeting Friday. The company has enjoyed “constructive dialog” with the investor, he said.

Hiesinger is trying to transform the steelmaker into a more diversified industrial group and get out of making steel. In September he reached an agreement with Tata Steel Ltd. to merge their European steel businesses as producers seek ways to counter overcapacity and cut costs.

Addressing shareholders in Bochum, Germany, Hiesinger said Thyssenkrupp is heading in the right direction. The company will have a strategy dialog in May where it will hone its strategic vision as it prepares to say goodbye to steel.

Supervisory Board Chairman Ulrich Lehner said in prepared remarks that the supervisory board has supported Hiesinger’s strategic overhaul “from the beginning.” “A process of change doesn’t happen overnight," Lehner said.

Other Thyssenkrupp shareholders called for change.

Union Investment fund manager Ingo Speich said returns have been “disastrous,” with the stock far underperforming the sector since Hiesinger took charge. Speich, one of the top 20 shareholders, urged the CEO to look into all options for the businesses. The company should consider more joint ventures or selling operations, he said.

“We are building a strong industrial group,” Hiesinger said at the shareholder meeting. “At the next annual general meeting we will be able to present you not just with excellent operating earnings but also a convincing bottom line net profit.”

Forberg said in the interview that even though Cevian is an activist shareholder, it engages in a constructive way with Thyssenkrupp. It holds a seat on the company’s board and will continue speaking with management and participate in the strategy dialog this year.

--With assistance from Jan Dahinten and Andrew Blackman

To contact the reporters on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net, Eyk Henning in Frankfurt at ehenning1@bloomberg.net, Erik Schatzker in New York at eschatzker@bloomberg.net.

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Alex Devine, Nicholas Larkin

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