TKAMY Thyssenkrupp AG (PK)

By Ruth Bender and Nathan Allen 

BERLIN -- German steel conglomerate Thyssenkrupp AG is planning to split into two listed companies, the company said Thursday, taking a drastic strategic move following months of pressure from activist shareholders to improve profits and find a simpler structure.

Thyssenkrupp said the split would take place in the form of a spinoff, with two companies equal in size -- one comprising the company's materials operations and the other the group's capital goods businesses, which include the elevator and automotive components segments. Both companies will be listed and keep the name Thyssenkrupp.

"The management board is convinced that this new structure will allow the businesses to develop better and concentrate on their strengths," Thyssenkrupp said in a statement.

The company said it would propose the split to its supervisory board in a meeting Sunday. If the board approves, the split is still subject to shareholder approval.

Shares jumped nearly 18% on the news, bringing relief to investors after months of turmoil at the German industrial icon, which has seen its share price plunge.

"This could be a decisive turning point," said Marc Gabriel, an analyst from Bankhaus Lampe.

The move marks a victory for activist shareholders, who had pushed for an overhaul. They criticized Thyssenkrupp's conglomerate structure for being inefficient, too costly and too bureaucratic.

"This strategic decision is an important step to tackle the underperformance of the past," said Lars Förberg, co-founder of Swedish activist investor Cevian Capital AB, which holds roughly 18% in Thyssenkrupp. "This will reduce complexity, promote entrepreneurial freedom and agility, and enhance the ability of the ThyssenKrupp's businesses to realize their potential.

Hedge fund Elliott Management Corp., which holds under 3%, declined to comment.

The split however also shows Thyssenkrupp's efforts to find a solution that would allow the group to stay independent, in two future companies. The conglomerate for years faced calls from some shareholders for a wider break up of its disparate array of activities, including calls to shed its historic steel-producing operations, whose profitability has been lower than the units that make elevators and warships.

The Krupp foundation, which for decades was the steering force behind Thyssenkrupp as its top shareholder currently holding 21%, said it wasn't opposed to the plan.

"The foundation is obligated to the well-being of the company and won't be opposed to a solution that shows a good balance between securing sustainable competitiveness and securing lasting jobs," the foundation -- formed by Alfried Krupp von Bohlen und Halbach, the last family member to control the Krupp steel company -- said in a statement. Ursula Gather, head of the foundation, along with industrial workers groups, had rejected a more extensive breakup.

Clashes over the company's future had triggered a management crisis at Thyssenkrupp. Longstanding CEO Heinrich Hiesinger left the company abruptly in July, followed shortly after by Chairman Ulrich Lehner, citing a lack of support from shareholders. Thyssenkrupp's interim CEO Guido Kerkhoff Thursday said no decision had been taken on future management.

Shareholders had blamed Mr. Hiesinger for failing to deliver better returns. Under his lead, the company tried for years to restructure the industrial company to become less dependent on steel -- and instead focus on more profitable industrial goods and services, developing technology and building elevators, submarines, and automotive components.

Under the proposed split, Thyssenkrupp Materials will regroup steel and stainless steel production, materials trading, and steel-related processing. This will include the 50% interest in the planned European steel joint venture with Tata Steel Ltd.

The Thyssenkrupp Industrials company will comprise the elevator, automotive-supplies and plant-construction units.

The materials business will have annual sales of around 18 billion euros ($21.16 billion), while the industrials unit will have sales of around EUR16 billion, according to the company's forecast. Upon completion, existing shareholders will hold shares in both companies.

Write to Ruth Bender at Ruth.Bender@wsj.com

(END) Dow Jones Newswires

September 27, 2018 14:11 ET (18:11 GMT)

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