Thyssenkrupp Weighs Elevator Stake Sale as Buyers Circle

Thyssenkrupp Weighs Elevator Stake Sale as Buyers Circle

By Eyk HenningWilliam Wilkes, and Aaron KirchfeldJuly 8, 2019, 4:28 AM PDT Updated on July 8, 2019, 9:10 AM PDT

Thyssenkrupp AG has received interest from competitors and buyout firms for a stake in its 15 billion-euro ($16.8 billion) elevator unit, prompting the German industrial firm to explore a sale alongside its planned listing, people familiar with the matter said.

Private equity firms including CVC Capital Partners and KKR & Co., as well as rival elevator maker Kone Oyj, have expressed interest in part or all of the Thyssenkrupp division, the people said. As a result, the company is planning to start formal sale talks in the autumn, they said, asking not to be identified because the deliberations are private.

Sovereign wealth and pension funds are also interested in investing in the unit, they said. Thyssenkrupp shares were little changed at the close Monday in Frankfurt, after earlier gaining as much as 5.5%.

Representatives for Thyssenkrupp, Kone, CVC and KKR declined to comment.

“We’re open to all economically viable solutions that fairly take into account the interest of employees,” Markus Grolms, secretary at labor union IG Metall and Thyssenkrupp’s deputy chairman, said in response to Bloomberg queries. The union “will make sure the proceeds will be used to fund the further development of Thyssenkrupp.”

Image result for Credit Suisse  Global elevator market share by company

Thyssenkrupp will run a “dual-track” process, continuing to pursue its previously announced initial public offering for the business while entertaining bids, the people said. No final decisions have been made about how much of the asset to sell, and the interested companies may still decide against formal offers, they said.

Thyssenkrupp so far has been hesitant to sell a majority stake because it would like to keep control to access the unit’s cash flow and help fund pension liabilities, the people said. Still, certain shareholders, including activist investor Cevian Capital, favor a full sale, the people said.

The division, Thyssenkrupp’s crown jewel, makes parts used in elevators, escalators, moving walkways and stairlifts and could be worth about 15 billion euros in an IPO or sale, according to Bloomberg Intelligence analysts. The German company has been weighing ways to split off the unit as it came under fire for a complicated business structure that some investors have said contributed to declining earnings.

The start of 2020 would be the earliest opportunity for an IPO, the elevator unit’s union chief and board member, Knut Giesler, has said. A listing is unlikely before March of next year, and uncertainty over the timing and valuation of any IPO is another incentive for a sale, the people said.

The elevator division is riding a global trend of urbanization, making it the steel-to-submarine conglomerate’s most profitable unit. Proceeds from a sale or IPO could be used to fund the company’s restructuring, paid out in a dividend or invested in carbon-dioxide freesteel production, the people said.

The Essen-based conglomerate needs cash to cover billions of euros in unfunded pension liabilities and fix its steel, plant construction and auto supply operations. The company sees the elevator unit as the only significant division it could offload a stake in at a valuation above book value, the people said.

Kone is keen to buy a majority of the elevator business, but Thyssenkrupp is concerned about a lengthy antitrust review and rejection of a merger, the people said. Its proposal to create a European steel joint venture with Tata Steel Ltd.was blocked earlier, and Thyssenkrupp may prefer to sell a stake to an investment firm, which wouldn’t face competition scrutiny, some of the people said.

The European Commission has torpedoed a number of industrial merger plans this year. Regulators blocked plansto merge Siemens AG’s and Alstom SA’s rail operations to create a European champion.

Other Thyssenkrupp assets, including the components technology business have also attracted preliminary interest from buyout firms, though it’s unclear whether the firm will seek a sale, the people said.

— With assistance by Sarah Syed(Updates with labor union statement in fifth paragraph.)UP NEXT

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