Activist Investor Cevian Capital Takes Larger Stake In ThyssenKrupp

As activist investor Cevian Capital takes an 11% stake in European steelmaker ThyssenKrupp AG (FRA:TKA) (ETR:TKA), it punctuates the pressure being placed on the firm’s CEO, Heinrich Hiesinger.  Mr. Hiesinger was hired to turn around the firm, sell assets and re-invent the staid and “tainted” corporate culture, according to a report in the Financial Times.

Activist Investor Cevian Capital Takes Larger Stake In ThyssenKrupp

Mr. Hiesinger’s strategy is to migrate from the troubled steel business into higher tech areas he believes could be promising such as elevators, factory design and construction, according to a New York Times report. He does this all the while attempting to exit from costly and outdated steel plant investments and trying to untangle regulatory problems and straighten out a crisis-plagued stainless steel business.  To date, the firm is managing a series of damaging scandals, including connection with a price-fixing scandal where ThyssenKrupp AG (FRA:TKA) (ETR:TKA) paid a total of €191 million in fines to settle the matter.

Hiesinger took over ThyssenKrupp in 2011

Mr. Hiesinger, who for now has the support of Cevian Capital, took over ThyssenKrupp AG (FRA:TKA) (ETR:TKA) in 2011 and his plans have failed to turn around profits.  Although eight businesses units representing 30% of sales have been sold, 70 percent of the top 40 managers have been eliminated and annual costs were cut by €600 million, the firm having suffered losses of $9 billion in the last six years and backing for the CEO may be slipping.  Mr. Hiesinger appears to be losing support from the Krupp Family Foundation, the founding father’s institution that has been the controlling shareholder since the late 1990s, the New York Times reported.

Challenges for Hiesinger

Going forward, the challenges for Mr. Hiesinger will center around the parts of the company he sheds, raising assets for strategic acquisitions and firming up the balance sheet.  When he looks to shore up the firm’s cash position, Mr. Hiesinger may no longer be able to depend on the Krupp Foundation, which recently declined to participate in a December capital call and instead allowed its stake in the firm to fall from 25% to 23%.


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