Thyssenkrupp Activist Investors Unhappy With Tata Steel Deal
Thyssenkrupp’s largest investor, Cevian Capital, voted against the deal.
(Bloomberg) -- Major investors in Germany’s Thyssenkrupp AG criticized terms of the company’s steel joint venture agreement with India’s Tata Steel Ltd., a sign pressure on Chief Executive Officer Heinrich Hiesinger won’t lift as he prepares to sign the deal on Monday.
The company’s largest investor, Cevian Capital, voted against the deal, according to a person familiar with the matter, when Thyssenkrupp’s supervisory board met Friday to approve setting up Thyssenkrupp Tata Steel B.V. with 50-50 ownership, more than nine months after signing a memorandum of understanding.
Hiesinger faced months of pressure from activist investors including Elliott Capital and labor representatives who argued a slump in profits at Tata made the deal less attractive for the German firm.
Elliott, which holds close to 3 percent in Thyssenkrupp, is underwhelmed by the final terms Hiesinger and his finance chief Guido Kerkhoff hashed out, according to people familiar with the matter. Elliott saw a deficit of 1.9 billion euros and called for an 80-20 split in favor of Thyssenkrupp, people familiar with the matter said earlier.
In a formal statement, Cevian co-founder and managing partner Lars Foerberg said the deal is “a step towards” reducing complexity within the company.
‘Urgent Need’
“There is now an urgent need and opportunity to address the significant and persistent underperformance of the industrial businesses," said Foerberg, whose firm holds a 18 percent stake. “Thyssenkrupp’s conglomerate strategy and matrix organization have failed.”
Cevian Capital had calculated that the diverging performance resulted in a valuation gap of 2.6 billion euros that would need to be plugged by Tata.
The Tata deal isn’t the only gripe activist investors hold against Hiesinger. Cevian has said Thyssenkrupp needs to untangle its sprawling operations and cut ballooning costs at its corporate center. The fund believes that creating a holding structure or potential listings or spinoffs could be beneficial, according to people familiar with the matter.
Ingo Speich, funds manager at Union Investment said the deal was a step in the right direction, but added that the result of the negotiations were “disappointing.”
“Mr. Hiesinger must swiftly push forward with the overhaul so Thyssenkrupp is prepared in case of an economic downturn,” Speich said.