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Thyssenkrupp shareholders said to be sceptical of Tata Steel deal

Talks over the final terms of the steel joint venture are entering a final stretch and the outcome will be decisive for Thyssenkrupp CEO Heinrich Hiesinger, who has pegged the future of the company on the deal.

business Updated: Jun 18, 2018 11:15 IST
Eyk Henning
Eyk Henning
Bloomberg
Thyssenkrupp,Tata Steel,Thyssenkrupp Tata Steel JV
A logo of ThyssenKrupp AG is pictured outside the ThyssenKrupp headquarters in Essen.(REUTERS File Photo)

Thyssenkrupp AG’s top shareholders are sceptical about the company’s plan to combine European steel operations with Tata Steel Ltd., and have discussed voting against the proposal at a board meeting as early as next week, according to people familiar with the matter.

The shareholders, which include Cevian Capital and the Alfried Krupp von Bohlen und Halbach-Stiftung foundation, are pressuring management to improve the deal after a slump in profits at the Tata division made it less attractive for Thyssenkrupp. Even though management is working to negotiate changes, some shareholders are concerned that the tweaks will only look good on the surface and not be substantial enough, said the people, who asked not to be identified discussing confidential matters.

The discussions are ongoing, and it’s not clear how the investors will eventually vote. Talks over the final terms of the steel joint venture are entering a final stretch and the outcome will be decisive for Thyssenkrupp’s Chief Executive Officer Heinrich Hiesinger, who has pegged the future of the company on the deal.

While Thyssenkrupp doesn’t have to put the joint venture decision to a shareholder vote, the foundation, which has two representatives on the supervisory board, and Cevian, with one seat on the committee, can exert influence over the transaction. Thyssenkrupp’s supervisory board is to meet as early as next week to vote on the deal.

The board has hired JPMorgan Chase & Co. for a fairness opinion, and Thyssenkrupp hired Rothschild & Co., Goldman Sachs Group Inc. and Deutsche Bank AG as advisers, said the people. Frankfurter Allgemeine Zeitung reported the mandates earlier on Sunday.

A spokesman for Thyssenkrupp declined to comment.

Cevian, the second-largest shareholder, estimates the difference between the valuation for Tata and Thyssenkrupp at about 2.5 billion euros ($2.9 billion), the people said. Goldman Sachs, adviser for Thyssenkrupp’s management, has calculated the difference at less than 1 billion euros because it expects an uptick in profits at Tata’s European steel operations, according to the people.

--With assistance from William Wilkes.

First Published: Jun 18, 2018 11:13 IST