By Christoph Steitz and Tom Käckenhoff
FRANKFURT/DUESSELDORF, Germany (Reuters) – Heinrich Hiesinger’s position as Thyssenkrupp’s <TKAG.DE> CEO is more precarious than it has ever been as he prepares to unveil a new strategy to placate impatient investors, including Cevian and Elliott, people familiar with the matter said.
A 10 percent gain in the industrial group’s share price on news that hedge fund Elliott was taking a stake on Tuesday, the biggest single-day gain in almost a decade, laid bare the dwindling faith investors have in Hiesinger to turn the group around.
Elliott’s engagement comes as investors’ patience is thinly stretched over the length of time it is taking Hiesinger to divest the group’s legacy steel business into a joint venture, a move aimed at revealing the value of Thyssenkrupp’s higher-tech businesses.
The investment, just weeks before a planned strategy refinement expected in July, may also provide a wedge to force through a radical overhaul of Thyssenkrupp – with or without Hiesinger.
“Hiesinger’s days are numbered if there is no 180-degree turnaround with regard to the strategy,” said a banking source familiar with the company, adding Thyssenkrupp’s portfolio offered numerous ways for potential restructuring.
JP Morgan, in a note, said scepticism over management’s ability to turn around the capital goods business, which will form Thyssenkrupp’s core after its exit from steel, was a key reason why the group’s shares have underperformed.
Since the steel joint venture was first announced in September, shares in Thyssenkrupp have lost about 9 percent, compared with a 3-percent rise in the German blue-chip DAX index <.GDAXI>.
Some investors, most notably Sweden’s Cevian, which holds about 18 percent of the group, have called for a break-up of Thyssenkrupp’s complex conglomerate structure, arguing that it puts a heavy discount on the stock.
With Elliott’s involvement, this effort could gain momentum and solve what analysts at Jefferies have described as Thyssenkrupp’s “identity crisis”, people familiar with the matter said.
Hiesinger, who remains opposed to a break-up, can still count on the support of Ulrich Lehner, Thyssenkrupp’s supervisory board chairman, who has publicly defended the CEO and his strategy.
In the job since 2011, Hiesinger is highly respected inside the company, having reduced Thyssenkrupp’s exposure to the struggling steel sector, slashed debt and strengthened the group’s elevator and car parts businesses.
Replacing Hiesinger, who turns 58 on Friday, against Lehner’s will is seen as unlikely. Hiesinger’s and Lehner’s contracts both run until 2020.
Thyssenkrupp, Elliott and Cevian all declined to comment.
(Additional reporting by Danilo Masoni in London; Editing by Adrian Croft)