TKAMY Thyssenkrupp AG (PK)

By Donato Paolo Mancini 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 25, 2018).

Activist investor Elliott Management Corp. on Thursday said it had taken a stake in German industrial giant Thyssenkrupp AG, entering another European corporate battle at a company already under pressure to break itself up.

The hedge fund was quick to signal its intention to make changes at the company. Elliott Advisors, its British arm, said, "Thyssenkrupp has significant scope for operational improvement which would benefit all stakeholders."

The move adds to pressure on the management of the German conglomerate. It has already faced shareholder calls to shed its historic steel-producing operations, which have been a drag on earnings, while the units that make elevators and warships deliver far higher profit margins.

Shares in the company have slumped more than 22% during Heinrich Hiesinger's seven-year tenure as chief executive.

Swedish activist investor Cevian Capital AB is the biggest stakeholder in the company with more than 13%, according to FactSet. Cevian declined to comment on the Elliott investment. The Swedish investor has expressed frustration that Thyssenkrupp's management has failed to deliver on its earnings promises while it has been outperformed by its rivals.

Thyssenkrupp, which traces its roots to the early 19th century and has long been a symbol of Germany's industrial power, declined to comment on the Elliott stake.

Mr. Hiesinger in January pledged to carry out a strategic review once the merger of Thyssenkrupp's European steel business with those of Tata Steel takes effect. Efforts to complete the deal announced last year have slowed amid labor talks, delaying the strategy update and frustrating investors. Thyssenkrupp has said it expects the deal to be completed around midyear.

Thyssenkrupp is the latest European company Paul Singer's Elliott Management has invested in. The firm has taken a stake of more than 3% in pay-TV giant Sky PLC, anticipating a possible bidding war between 21st Century Fox Inc. and Comcast Corp.

Earlier this year, it launched a proxy fight at Telecom Italia SpA to simplify corporate governance. In early May, it took two-thirds of the company's board seats, leaving majority shareholder Vivendi SA with just five of 15 seats.

Last year, Elliott pushed Dutch paint maker Akzo Nobel NV to enter deal talks with U.S. rival PPG Industries Inc. Elliott and Akzo eventually reached a truce in which the paint maker agreed to separate its specialty-chemicals business. The company also added two board members backed by Elliott.

Elliott in 2015 invested in U.S. aluminum giant Alcoa Corp., spurring the company to spin off its higher-margin automotive and aerospace-parts business. After the company spun off the operation into Arconic Inc., Elliott last year urged the replacement of Chief Executive Klaus Kleinfeld after several profit warnings. Mr. Kleinfeld resigned months later.

Elliott said the investment in Thyssenkrupp was "significant" but, for now, below the required disclosure levels of 3%. It didn't spell out what changes it wanted the company to make.

Broker Jefferies said Elliott might push Thyssenkrupp to dispose of its material-services business, launch an initial public offering of its steel business or introduce measures to turn around its capital-goods businesses. It might also join calls from Cevian to simplify the corporate structure, Jefferies said.

Thyssen's shares jumped in reaction to Elliott's disclosure on Thursday, but closed flat in Europe. The stock has gained around 8% this week amid speculation that the fund was getting involved.

(END) Dow Jones Newswires

May 25, 2018 02:47 ET (06:47 GMT)

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