Thyssenkrupp Sells Elevator Business for $19B to Private-Equity Group
On Thursday, February 27, Thyssenkrupp AG’s Supervisory Board announced it would sell its elevator segment to a private-equity consortium led by Advent International, Cinven, and RAG foundation for 17.2 billion euro, or $18.9 billion. The sale is the result of a bidding war that involved rival bidders from Kone Oyj, Blackstone Group Inc., Brookfield Asset Management Inc., and Hitachi Ltd. The deal is expected to close before the end of the fiscal year.
Thyssenkrupp says the sale will be for the entirety of the elevator section. CEO Guido Kerkhoff’s initial plans were only to sell a stake in the business, Thyssenkrupp’s most valuable asset. Kerkhoff was replaced in September 2019, which fueled speculation that the new CEO would be more amenable to a total sale. Thyssenkrupp will reinvest $1.37 billion of the purchase price to buy a stake in the business after it’s been sold.
According to Kerkhoff’s replacement, interim CEO Martina Merz, the sale is “paving the way for Thyssenkrupp to become successful.” The sale of the ailing German manufacturer’s elevator unit should allow it to pay off some outstanding debts as Merz continues to look for underperforming units to sunset or shut down. According to the company’s latest earnings report, Thyssenkrupp’s net debt was more than $7.7 billion. The company has been squeezed by rising pension costs and a simultaneous slowdown in the German manufacturing economy.
“With this,” Merz said in a statement, “Thyssenkrupp can pick up speed again.”
While the company says that paying off outstanding debts should “considerably lower” annual spending on interest payments, the move is unlikely to be Thyssenkrupp’s final move towards solvency. In the same statement announcing the sale, Thyssenkrupp announced the Supervisory Board would consider further restructuring decisions in May. Those might include further unit sales or shutdowns.
The buyers have reportedly agreed to a number of site and employment guarantees to make the sale easy on Thyssenkrupp elevator employees. “We are not pleased to part with our employees and the elevator business,” said Merz, but expressed optimism the newly-formed independent elevator company would perform well. The sale is still subject to approval from regulatory agencies.
