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Thyssenkrupp bows to activist investor by simplifying organisation

Reuters  |  FRANKFURT 

By Christoph Steitz

FRANKFURT (Reuters) - Thyssenkrupp's decision to simplify its marks a victory for activist investor as the German conglomerate strives to keep shareholders onboard with its broader restructuring plan.

Alongside a weak set of first-quarter results on Tuesday, the group said it would scrap its matrix structure, which has long been criticised by investors for adding costs and slowing down decision making with its multiple leadership layers based on products and regions.

The company said the move, which includes taking out parts of its organisation related to regional headquarters and shared services, would help to reduce general and administrative costs to below 300 million euros ($339 million) by 2020/21. That would be down by more than a fifth from current levels.

Cevian, Thyssenkrupp's second-largest shareholder with an 18 percent stake, has been one of the more vocal critics of the matrix structure, calling for a more nimble and leaner set-up for the maker of everything from to

"The decision of Thyssenkrupp's management team to remove the matrix structure is a major step to free entrepreneurial forces and increases accountability of management," Lars Foerberg, founding of Capital, said in a statement sent to

"has great potential and we support every step that improves the competitiveness of the company."

The organisational changes mark the second victory for in just a few months after Switzerland's ABB, in which it holds a 5.3 percent stake, in December also scrapped a matrix structure.

The revamp at comes ahead of a broader restructuring that will see the group separate its capital goods arm - elevators, and plant engineering - from its materials operations, and needs to be implemented before the legal separation, which will be effective as of October.

While many investors have pushed for the break up of the conglomerate, shares have lost about a third in value since it was announced in September, with some anxious about the lack of detail provided so far.

"There won't be any excuses going forward," Thyssenkrupp told journalists on Tuesday, referring to increased accountability of the new structure.

The way are organised is a regular target for activist investors. in November announced the creation of six business units, its biggest organisational overhaul in the last 20 years, after Nelson Peltz, of activist hedge fund Trian Partners, pushed for a simpler structure.

($1 = 0.8853 euros)

(Editing by Mark Potter)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, February 12 2019. 22:21 IST