Thyssenkrupp break-up plans face dif­fi­cul­ties

Viet Nam News - - MAR­KETS -

FRANK­FURT —Thyssenkrupp faces risks rang­ing from eco­nomic uncer­tainty to car­tel fines in 2019, po­ten­tially com­pli­cat­ing a planned spin-off of the Ger­man com­pany’s cap­i­tal goods busi­ness which has so far left some in­vestors un­con­vinced.

Shares in Thyssenkrupp have fallen 26 per cent since Sep­tem­ber when it bowed to long-stand­ing pres­sure to sep­a­rate its el­e­va­tors, car parts and plant en­gi­neer­ing from steel, naval ves­sels and met­als distri­bu­tion, lag­ging Ger­man, Euro­pean and global stocks.

While the break- up plan is backed by the Al­fried Krupp von Bohlen and Hal­bach foun­da­tion and Ce­vian, Thyssenkrupp’s two big­gest share­hold­ers, other in­vestors ques­tion whether it will solve the Ger­man con­glom­er­ate’s big­ger prob­lems.

“Over­all, I still don’t see how Thyssenkrupp will get any­where,” said Thomas Hecht­fis­cher, man­ag­ing di­rec­tor of share­holder ad­vi­sory group DSW, which rep­re­sents 1 per cent of the group’s vot­ing rights at its an­nual gen­eral meet­ing.

“2019 won’t be the only tran­si­tion year for the group. I sus­pect there will be quite a few,” he said of the tur­moil at Thyssenkrupp, whose chief ex­ec­u­tive and chair­man left as a re­sult of the sus­tained in­vestor dis­quiet.

Some an­a­lysts say fears of a global eco­nomic down­turn as well as po­ten­tial fines over al­leged car­tel agree­ments in Ger­many could also hit Thyssenkrupp at a time of al­ready stretched fi­nances.

“Bal­ance sheets will be an area of fo­cus in a more se­vere in­dus­trial re­ces­sion sce­nario. We see Thyssenkrupp as par­tic­u­larly vul­ner­a­ble,” Bar­clays an­a­lyst Lars Bror­son wrote.

Rat­ing the stock “un­der­weight”, Bar­clays has set a tar­get price of 14.50 eu­ros per Thyssenkrupp share, 10 per cent be­low where its stock was trad­ing on Thurs­day.

One top-20 share­holder, who de­clined to be named, said Thyssenkrupp’s man­age­ment still needed to prove that the break-up will re­sult in a smaller, more ag­ile set-up, adding: “Sim­ply an­nounc­ing a breakup doesn’t change any­thing.”

Thyssenkrupp, whose AGM is sched­uled for Fe­bru­ary 1, plans to get most of the break-up work, in- clud­ing a le­gal sepa­ra­tion as well as top man­age­ment ap­point­ments, done this year be­fore share­hold­ers are to ap­prove the split in a year’s time.

“The two en­ti­ties will still be a dis­parate col­lec­tion of busi­nesses lack­ing syn­er­gies ... the split en­ti­ties will con­tinue to present chal­lenges for in­vestors to fore­cast and value with a likely dis­count to val­u­a­tion,” Morn­ingstar an­a­lyst Denise Molina said in a note.

The main stick­ing point is uncer­tainty over Thyssenkrupp’s el­e­va­tor and car parts busi­nesses, the core of the planned spin-off, partly be­cause of an au­to­mo­tive in­dus­try down­turn.

“The scep­ti­cal in­vestor might worry that group man­age­ment hasn’t asked enough dif­fi­cult ques­tions about how mar­gin ex­pan­sion and/or or­der book growth has been achieved,” a top- 40 share­holder, who also de­clined to be named, said. — REUTERS


Steel coils are stored at the Thyssenkrupp steel fac­tory in Duis­burg, Ger­many. — Photo

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