Frankfurt/Dusseldorf: Thyssenkrupp AG’s top shareholders are skeptical 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.
Thyssenkrupp shares slipped 0.6% to 23.18 euros as of 9:18 am in Frankfurt. The stock is down 4.3% this year.
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.
Separately, Thyssenkrupp CEO Hiesinger in an internal letter said the firm needs to quickly clinch a deal for a planned European steel joint venture with Tata Steel, adding that this was necessary to determine the group’s long-term strategy.
“Therefore we are in close consultations with the supervisory board," Hiesinger wrote in a staff note dated 14 June, a day after the group’s supervisory board met to discuss the deal.
Thyssenkrupp, under pressure from activist shareholders Cevian and Elliott as well as powerful unions, has less than two weeks to get the deal through its supervisory board in order to hit a self-imposed end-June deadline.
Talks have dragged on for more than two years and hit a further snag over the valuation of European steel assets, which have performed differently for Tata Steel and Thyssenkrupp since the initial deal was first announced in September.
“The process is taking significantly longer than anticipated by us in the beginning," Hiesinger said in the staff note that was obtained by Reuters, adding the was aiming for a “constructive dialogue with all investors".