TKAMY Thyssenkrupp AG (PK)

   By Nathan Allen 
 

Thyssenkrupp AG's (TKA.XE) recent warning that its industrial-solutions unit will miss earnings expectations shows that the group's structure is too complex and in need of reform, according to a statement made by activist shareholder Cevian Capital on Wednesday.

"Now is the opportunity for the company to find the right structure to allow its units to be more competitive, to grow and to be more successful," said Lars Foerberg, the founding partner of Cevian, which has built up a 13.7% stake in Thyssenkrupp since it first invested in the company in 2013.

Mr. Foerberg pointed to other German companies such as Bayer AG (BAYN.XE), Siemens AG (SIE.XE) and Daimler AG (DAI.XE) as examples of large businesses that have undergone successful restructuring.

"We see no reason why Thyssenkrupp should not explore the same opportunities to strengthen its business," he said.

Thyssenkrupp recently agreed to merge its European steel business with Tata Steel Ltd. (500470.BY) and spin off the merged company as part of a strategic pivot away from steel production. However Cevian and fellow activist shareholder Elliott Management Corp. (ELLA.XX) were reportedly unhappy with the terms of the deal and the pace of the strategic overhaul. Both groups are in favor of a broader restructuring that would bring greater focus to the group's sprawling portfolio, which spans steel production to the manufacture of elevators and submarines.

The sudden departure of former Chief Executive Heinrich Hiesinger and Chairman Ulrich Lehner, who had long resisted a breakup, were widely seen as a victory for the activists.

Tuesday's profit warning may be the last straw for frustrated investors, according to Jefferies analyst Seth Rosenfeld.

"Following years of lackluster divisional performance, this news may be the nail in the coffin for TKA's conglomerate structure," he said.

Write to Nathan Allen at nathan.allen@dowjones.com

(END) Dow Jones Newswires

August 01, 2018 11:36 ET (15:36 GMT)

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