Largest German shipyard, TKMS, achieves self-governance
Thyssenkrupp AG, the German conglomerate, is set to spin off its naval division, TKMS AG & Co. KGaA, by the end of October. The new governance structure for TKMS has been announced, with a 10-member supervisory board set to oversee the company's operations.
The supervisory board will consist of 6 members appointed by Thyssenkrupp AG, ensuring a majority control, 4 independent representatives to align with market expectations, and a seat for the Krupp Foundation, Thyssenkrupp's largest shareholder. This structure reflects Thyssenkrupp's 51 percent majority stake in TKMS, providing strategic oversight and stability for the marine business while allowing operational independence and access to capital markets.
The planned governance model, however, has drawn some criticism for maintaining significant influence by the parent company and limiting board independence. Some minority shareholders and financial experts have advocated for a supervisory board primarily composed of independent members to protect their interests.
TKMS, the world leader in non-nuclear operated submarines, employs around 8,300 people and operates shipyards in Kiel, Wismar, Itajaí, Brazil, and other locations. The company has received numerous submarine orders from Germany, Norway, Israel, and Singapore since 2021, with Singapore recently ordering two more submarines for the Indo-Pacific region.
The order backlog for TKMS has grown by more than 50% since the end of September, reaching over €18 billion, including a €1.2 billion order for the construction of the new German research ship 'Polarstern 2'. The spin-off is expected to be followed by an IPO, marking TKMS's independence from Thyssenkrupp.
The federal government has approval and pre-emption rights, and the right to propose a member for the TKMS supervisory board. However, the TKMS supervisory board chairman, Volkmar Dinstuhl, has stated that an acquisition of shares by the Federal Republic of Germany is not part of the current plan.
The CEO of TKMS, Oliver Burkhard, is a former Thyssenkrupp HR director. He will lead TKMS as it becomes an independent entity, part of a planned corporate restructuring at Thyssenkrupp, with the other four divisions also to be set up independently and opened up for third-party participation.
The spin-off of TKMS has received general support from shareholders, who cite potential benefits for corporate management and attractiveness to investors. However, some critics have raised concerns about the promised independence remaining under supervision with the parent company. Hendrik Schmidt of DWS, for example, stated that the parent company will act as the "shadow captain on the bridge."
Despite these concerns, the spin-off and subsequent IPO of TKMS are expected to proceed as planned, marking a significant step in Thyssenkrupp's corporate restructuring.
The supervisory board of TKMS will be predominantly appointed by Thyssenkrupp AG, ensuring a significant influence from the parent company in the finance and business affairs of the naval division. The spin-off and eventual IPO of TKMS, aimed at providing operational independence, is expected to attract investors seeking to invest in the promising business ventures of this marine company.
