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Thyssen restructures
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November 16, 1999: 8:24 a.m. ET
German company to offer metals business shares, cut 20,000 jobs
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LONDON (CNNfn) - German steel and engineering company ThyssenKrupp announced a major restructuring Tuesday that will see it offer shares in its metals business next year and shed 20,000 jobs by spinning off non-core businesses.
The Düsseldorf-based company plans to trim its 23 operating divisions to just six core areas, claiming the changes will triple its income and double its return on equity.
The news sent the company's shares soaring more than 13 percent at one point to 24.60 euros before slipping back a little to 23.80 euros at midday.
The key element is the offering of between 25 and 30 percent of its ThyssenKrupp Steel unit, one of the world's largest. The sale is expected to yield 3 billion marks ($1.48 billion).
The steel arm accounted for more than a third of ThyssenKrupp's 63 billion mark sales total in the fiscal year ended March 31. However, volumes have declined because of global overcapacity.
ThyssenKrupp said the changes would boost pretax income to 3 billion marks ($1.58 billion) next year from 1 billion in the year ended in March, and boost its return on equity to 30 percent from 15 percent in the latest fiscal year.
The reorganization had been widely expected in the wake of consolidation in the European steel sector, notably the merger between British Steel and Hoogovens of the Netherlands to create Corus.
Other German firms have benefited from a corporate split, notably the engineering and telecom company Mannesmann. Investors have tended to discount engineering stocks in favor of sectors with better growth prospects.
ThyssenKrupp said the changes would allow it to invest 12 billion marks ($6.32 billion) in its core businesses over the next three years and reduce the cyclical nature of its profit. It plans to spin off non-core units with annual sales totaling 10 billion marks, principally by ending its machine-building operation.
The move would lead to the loss of 20,000 jobs from its 180,000 global workforce.
The core areas will be steel, autos, elevators, production systems, engineering components, materials and industrial services.
The company is Germany's fifth-largest by market capitalization, formed in March this year from the merger of Thyssen AG and Fried Krupp AG. 
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ThyssenKrupp
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