Thyssenkrupp: why the group is selling its shipyards – economy

The German shipyard group is the world market leader for non-nuclear-powered submarines – and could soon be majority owned by a US financial investor: The Essen-based steel and technology group Thyssenkrupp announced on Tuesday that Carlyle, a large American investment company, is now taking over the books of the shipyard subsidiary Thyssenkrupp marine Systems (TKMS) take a closer look. Both sides have been talking about an entry for a long time, now “an in-depth examination and assessment”, the so-called due diligence, is beginning. says the message. The aim is a partial sale, so Thyssenkrupp would like to retain shares. In addition, the federal government should take over a minority share. Negotiations are continuing here too.

According to the Bloomberg news agency, the Americans want to acquire the majority; the group with 7,800 employees – 3,100 of them in Germany’s largest shipyard Kiel – could be valued at 1.5 billion euros. However, the responsible Thyssenkrupp board member Volkmar Dinstuhl emphasized that Carlyle’s entry was only “one of several options”.

In addition to submarines, TKMS manufactures frigates, corvettes, electronic systems for the navy and systems for recovering old ammunition. The Pursue has orders for twelve billion euros on its books – and these date back to before the turning point in security policy, i.e. before Russia’s attack on Ukraine. Governments have since vowed to invest more in their armies and navies. TKMS would like to benefit from this. Shipyard boss Oliver Burkhard estimates that demand will double or triple in the next ten years. To deal with this, some shipyards in Europe will have to join forces, observers say.

The entry of a financial investor into TKMS could be the first step in such a wave of concentration. Ultimately, these investors want to turn their investments into a profit after a few years – through an IPO or sale to other companies. Miguel López, CEO of the parent company Thyssenkrupp, said this at the general meeting in February, spinning off TKMS was “an indispensable step towards a possible national and European consolidation” of the shipyard industry.

The company simply has no money

The prospects for the subsidiary are brilliant: The fact that Thyssenkrupp still wants to sell the division is due to pure lack of money. The shipyard group, which was previously called Howaldtswerke-Deutsche Werft (HDW), requires large investments. In addition, Thyssenkrupp must provide billions in financial guarantees to customers so that customers can be sure that the shipyards can actually finish building the submarines and frigates. Because of these burdens, López is looking for a buyer – like his predecessor Martina Merz, who resigned last spring.

These financial guarantees are also the reason why the federal government is needed as a minority owner. Without the federal government as a partner, it would be difficult for an independent provider TKMS to provide these guarantees. In addition, the federal government could use its share to ensure that in the event of a merger with shipyards abroad, Germany retains the lead and the local locations do not lose any strategically important manufacturing know-how. However, it is not completely certain that the federal government will actually get involved – just as Carlyle will not take over the majority. But at least the federal government “only recently assured us that it would examine state entry,” as Thyssenkrupp boss López says. This is “an important intermediate step on the way to making the business independent.”

A spokesman for IG Metall demanded on Tuesday that the federal government must hold a blocking minority of shares in order to be able to prevent unpleasant decisions. The union now wants to begin discussions with Carlyle quickly; Locations, jobs and co-determination rights must remain secured.

There is a model for an IPO

If a financial investor like Carlyle gets involved, he could later try to raise his money through an IPO instead of through a sale to other shipyards. There is a role model for this: the defense electronics specialist Hensoldt. The company from Taufkirchen near Munich was originally the radar division of the aerospace company Airbus. In 2017, the American financial investor KKR took over the company and took it public in 2020. The shares are now listed in the MDax index, like Thyssenkrupp’s shares.

Thyssenkrupp boss López not only wants to spin off TKMS, but also the ailing steel division. This also requires high investments, for example for the climate-friendly conversion of production. But money is chronically tight at Thyssenkrupp: catastrophic bad investments in steel plants in Brazil and the USA led to billions in losses a good ten years ago, from which the company has never really recovered. And in addition to the shipyards and steel, the other areas of the company also need money to finance their growth. Thyssenkrupp is an automotive supplier, mechanical engineer and materials dealer and has a subsidiary that produces electrolyzers for producing hydrogen.

López is negotiating the steel division for months with the Czech billionaire Daniel Křetínský about joining, but the talks are stalling, partly because of the poor economy. Maybe the chairman of the board at the shipyards will reach his goal more quickly.