Thyssenkrupp is expecting a separate joint venture to combine its European Steel business with Tata Steel to be abandoned after failing to win antitrust approval, one of the sources said.
Frankfurt: Thyssenkrupp is considering a stock market listing for elevators, its most valuable business, after a previous plan to split the entire group in two ran into investor scepticism, three sources familiar with the matter told Reuters on Friday.
Chief Executive Guido Kerkhoff is abandoning his initial proposal to break Thyssenkrupp into two because its low share price has made a cross-shareholding structure unworkable, these sources said.
Thyssenkrupp is now considering a new approach, involving a holding structure and a carve-out or partial listing of its elevators division, they added.
Separately, Thyssenkrupp is expecting a separate joint venture to combine its European Steel business with Tata Steel to be abandoned after failing to win antitrust approval, one of the sources said.
Thyssenkrupp shares rose 10 percent — on course for their best day in a decade — after Reuters reported the company was considering a partial listing of the elevators division, which analysts have estimated to have an enterprise value of at least 14 billion euros.
Tata Steel shares were down 5.4 percent in Mumbai.
Thyssenkrupp’s market value is currently only around 6.9 billion euros ($7.7 billion).
Activist investor Cevian has an 18 percent stake in Thyssenkrupp with another activist, Elliott Capital Advisors also holding a smaller stake.
Conglomerates have come under pressure from activists, a step which prompted rival General Electric to spin off its healthcare business and for Siemens to announce it will separate its flailing gas turbines business.
Thyssenkrupp unveiled plans last September to create two divisions: Thyssenkrupp Industrials, spanning its elevators, car parts and plant engineering businesses, and Thyssenkrupp Materials, which included materials trading and shipbuilding.
Rising trade tensions between the United States and China, and fears of a disorderly Brexit have dented share prices, forcing a number of companies including Continental and Volkswagen to review plans for spin offs and listings.
Kerkhoff’s idea was to separate higher quality capital goods operations of elevators, auto supplier and core plant construction from its other more cyclical businesses.
Specialized businesses are often more highly valued than conglomerates because in times of growth, high-potential assets do not have to share the balance sheet with lower-return businesses.
But Kerkhoff’s plan has failed to sustainably lift the company’s share price. After two profit warnings, Thyssenkrupp’s share price is too low to make this deal work, leaving Kerkhoff’s scrambling for a Plan B, these people said.
The original blueprint planned for Thyssenkrupp Materials to hold a 30 percent stake in Thyssenkrupp Industrials. But Thyssenkrupp shares have fallen by 47 percent over the past 12 months, making it the smallest constituent of Germany’s 30-share DAX index, even after a 10 percent bounce on Friday’s news.
Under the old restructuring plans, Thyssenkrupp Materials would have held a 50 percent stake in the planned steel JV with Tata Steel.
Movements in the share prices have forced Thyssen to reconsider the structure of the cross shareholding, and prompted a wholesale review of the company’s overhaul plans, the sources said.