ThyssenKrupp: Diversified Industrial Conglomerate

David Marcus presented his in-depth investment thesis on ThyssenKrupp (Germany: TKA) at European Investing Summit 2015.

ThyssenKrupp is a €9.4 billion market cap, diversified industrial conglomerate based in Germany. It was founded in 1999 through the merger of Thyssen AG and Krupp AG which were founded in 1891 and 1811, respectively. This industrial conglomerate became bloated and undermanaged after years of acquisitions that lacked synergies. Up until the financial crisis several years ago, the strength of its European steel business had been masking considerable problems in other divisions… primarily the steel businesses in the U.S. and Latin America. Today, the company operates in two primary businesses: steel (Steel Europe, Steel Americas, Material Services) and value-added capital goods (Elevator Technology, Components Technology, Industrial solutions). New management, led by highly talented ex-Siemens executives, was brought in 2011. This is a classic value investment opportunity of a cheap stock with significant catalysts. The company is undergoing a major transformation, both financially and operationally. David believes this is ultimately a break-up story where the company will refocus on its higher-margin, value-added capital goods businesses. Further, there is an opportunity to exit the steel business and help rationalize the entire European steel industry. David’s valuation shows that at current prices, investors are “creating” the capital goods segment at under 3.5x EBITDA compared to peers trading closer in the 8-9x EBITDA range. In addition, David believes activist investor Cevian Capital, which has amassed a 15% stake in the company, will help expedite value creation.

About the instructor:

David Marcus has more than 20 years of experience in the investment management business. He began his career at Mutual Series Funds, mentored by renowned value investor Michael Price, and rose to manage the Mutual European Fund and co-manage the Mutual Shares and Mutual Discovery Funds. He also served as director of European Investments for Franklin Mutual Advisors, LLC. After leaving Franklin Mutual, David founded Marcstone Capital Management, LP, a long-short Europe-focused equity manager, largely funded by Swedish financier Jan Stenbeck. When Mr. Stenbeck passed away in 2002, David closed Marcstone and then co-founded a family office for the Stenbeck family; as an advisor to the family, he advised on the restructuring of a number of the public and private companies the family controlled. He later founded and served as managing partner of MarCap Investors LP, the investment manager of a European small cap special situations fund, which he managed from 2004 to 2009.

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