Thyssenkrupp CEO quits under growing shareholder backlash

[FRANKFURT] Thyssenkrupp'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 finalised an agreement to set up a European steel colossus - a deal that lost its initial luster amid increasing opposition from investors and labour unions. While Mr 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 per cent in Frankfurt trading, and were 2.5 per cent higher at 22.03 euros as at 10.04am. The stock had declined about 30 per cent since Mr Hiesinger took the top job in 2011.

It became clear during the final stretch of the negotiations with Tata that Mr Hiesinger would have to leave, according to people familiar with the matter. Thyssenkrupp's board had been scheduled to discuss Mr 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, the two activist investors that control about 20 per cent of the company, would favour bringing in a new chief executive officer who could enact more sweeping changes at the engineering behemoth, according to people familiar with the matter.

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 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.

Mr 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 Mr 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 International Ltd analysts including Seth Rosenfeld.

Mr 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.

BLOOMBERG