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Thyssenkrupp CEO Resigns Under Growing Shareholder Backlash

July 6, 2018
Heinrich Hiesinger faced criticism from investors for not working fast enough to simplify Thyssenkrupp’s complicated structure, which runs from submarines and elevators to food packaging and steel.

Thyssenkrupp AG’s chief Heinrich Hiesinger resigned after seven years at the helm of one of Germany’s top industrial giants, bowing to shareholder anger over the company’s slumping revenue and share price.

News of his departure came days after Thyssenkrupp and Tata Steel Ltd. finalized an agreement to set up a European steel colossus -- a deal that lost its initial luster amid increasing opposition from investors and labor unions. While Hiesinger steered through the Tata deal, he lost the support of Thyssenkrupp’s board in the process.

Thyssenkrupp shares rose as much as 6.6% in Frankfurt trading, and were 2.4% higher at 22 euros as of 10:53 a.m. The stock had declined about 30% since Hiesinger took the top job in 2011.

It became clear during the final stretch of the negotiations with Tata that Hiesinger would have to leave, according to people familiar with the matter. Thyssenkrupp’s board had been scheduled to discuss Hiesinger’s new strategy on Friday, but will now meet to talk about his replacement, said the people, asking not to be identified because the discussions are private.

Elliott Management Corp. and Cevian Capital, two activist investors that control about 20% of the company, endorse Hiesinger’s decision to step down and favor bringing in a new chief executive officer who could enact more sweeping changes at the engineering behemoth, according to people familiar with the matter.

Aggressive Restructuring

“There is now an urgent need and opportunity to address the significant and persistent underperformance of the industrial businesses,” Cevian’s founding partner Lars Forberg said in an emailed statement last Sunday.

Thyssenkrupp may name Chief Financial Officer Guido Kerkhoff as interim CEO, Handelsblatt reported, citing unidentified people close to the company’s supervisory board.

Analysts at Jefferies International Ltd. said they expect the CEO’s departure to be "interpreted positively" as a sign that the company could consider more aggressive restructuring measures, including potential asset spinoffs.

Hiesinger, who studied engineering in Munich and rose through the ranks of Siemens AG, staked his reputation on transforming the sprawling German steelmaker into a higher-value engineering conglomerate. He faced criticism from investors including Cevian for not working fast enough to simplify Thyssenkrupp’s complicated structure, which runs from submarines and elevators to food packaging and steel.

Investor dissatisfaction intensified this year after Elliott took a stake in the company and pushed for more radical changes, while opposing Hiesinger’s leadership.

“We view Hiesinger’s departure as a sign of a growing divergence in vision between management and an increasingly disenchanted supervisory board spurred on by two activist investors, Cevian and Elliott,” wrote Jefferies analysts including Seth Rosenfeld.

Hiesinger’s exit will drive speculation that bigger changes will follow, including the possibility of a broader break up or spin off of the highly profitable elevator division, according to Jefferies.

By William Wilkes and Eyk Henning

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