Thyssenkrupp’s CEO under fire after stake sale

Bloomberg

Thyssenkrupp AG’s chief Heinrich Hiesinger is facing the fight of his career as a pair of activist investors take aim at the German industrial giant. Elliott Management Corp. is building a stake in the company and wants to oust the 57-year-old chief executive for failing to guide the company through a turnaround, according to people familiar with the matter. Hiesinger, who studied engineering in Munich and rose through the ranks of Siemens AG, staked his reputation on transforming the German steelmaker into an engineering conglomerate.
But he’s facing declining revenue, rising costs and a declining stock price. The company has also drawn shareholder criticism for its complicated structure, which runs from submarines to elevators and food packaging. Thyssenkrupp shares have lost about 30 percent since Hiesinger took the helm in January 2011.
For now, Hiesinger’s fate is unclear. To stay at the company, he’ll likely have to deliver on the promises of the steel joint venture with Tata Steel Ltd. and enact more swee-
ping changes to revive the company’s fortunes.
“Certainly, many investors (not least Cevian) have voiced exasperation at the seemingly endless restructuring,” at Thyssenkrupp, Christian Georges, an analyst at Societe Generale SA, said by email. There is a “recurring failure to impress at quarterly reporting,” he added. Thyssenkrupp rallied 9.6 percent in German trading, the biggest gain since 2009.
Elliott, led by Paul Singer, plans to re-evaluate the company’s top management and its planned multi-billion-dollar deal with Tata, said the people, asking not to be identified because the information is private. In line with its usual strategy, Elliott is building its stake in Thyssenkrupp and may cross the threshold of 3 or 5 percent in coming weeks, hurdles at which investors have to reveal their position, the people said.
Elliott has notched up a series of recent victories. Hyundai Motor Group bowed to pressure from the hedge fund and shelved an $8.8 billion deal, an unprecedented victory for shareholder activists in South Korea. Earlier this month, the firm won a proxy fight to take control of Telecom Italia SpA’s board, promising to push for asset sales and improve corporate governance.
Elliott joining forces with Cevian to shake up Thyssenkrupp could prove a “decisive step” towards change, according to Sylvain Brunet, an analyst at Exane BNP Paribas.
Cevian Capital, the second-largest investor, has previously argued that Thyssenkrupp needs to untangle its sprawling operations and cut ballooning costs at its corporate center.