Comments on the Elevator sale

The most important questions on the sale of the Elevator business answered by Martina Merz, CEO of thyssenkrupp AG, Peter Walker, CEO of thyssenkrupp Elevator, and for the acquiring consortium Ranjan Sen, Managing Partner, Advent International, and Bruno Schick, Partner and Head of DACH region, Cinven. Our two major shareholders and IG Metall union are also commenting on the sale.

Three questions to Martina Merz, Peter Walker, Ranjan Sen and Bruno Schick on the sale of Elevator

Comments of our two major shareholders and the IG Metall

“The best for the Group and for Elevator”

Three questions to Martina Merz, CEO thyssenkrupp AG

What are the reasons why the Management Board and Supervisory Board have decided to enter into an agreement with the consortium led by Advent, Cinven and RAG foundation?

Martina Merz: Let me start by saying that today is a good day. With hard work, we have achieved a very good solution which we can be proud of. The sales proceeds are higher than many had expected. Nevertheless, the step is of course not easy. We are not happy to let the employees of Elevator go. That is why we based our decision on clear criteria. First and foremost these were transaction security, speed and of course the economic value for thyssenkrupp. After careful consideration of all criteria, the decision has been made in favor of the consortium around Advent, Cinven and RAG foundation – in our view the best outcome for both the Group and Elevator. A full sale creates the greatest value for thyssenkrupp as a group of companies. But Elevator's employees will also benefit. With the new owners the elevator business will have strong partners. In addition, a far-reaching best- and fair-owner agreement has been signed. It was advantageous for the employees that parallel negotiations were held with both remaining bidders. This was an exceptional procedure and very creative. As this competitive situation led to a remarkably better result for the Elevator employees. So: The starting point for Elevator is good and offers clear prospects for the future.

What is thyssenkrupp doing with the money from the Elevator sale? Will our businesses also benefit?

Martina Merz: The proceeds from the sale create the conditions to make thyssenkrupp successful again. We plan to use the funds to reduce debt and to lower our structural costs. Specifically, we intend to fund part of our pension obligations and significantly reduce our financial debt. The sale will therefore improve our financial solidity. Only in this way will we have the leeway for developing and transforming the company. The primary objective is to improve the company's performance fast and substantially - this is what we mean by "performance first".

You have repeatedly said that the Elevator transaction is a prerequisite for defining a long-term strategy for thyssenkrupp. Which target picture do you have in mind for thyssenkrupp? When will we hear more about the strategy? And what are the next steps?

Martina Merz: Following the sale of Elevator we have clarity about the future funds available. It is already clear that thyssenkrupp will become a group of companies with highly specialized businesses and lean headquarters. In the future the businesses will compete with each other for funds. Against this background the management teams of the businesses will present their plans for the future before the Supervisory Board meeting in May. This will allow us, as the Group's Executive Board, to make a detailed assessment of the potential of each business, the funds needed and ownership structures that will allow our businesses to develop in the best possible way. On this basis, we can assess how we will actually use the funds from the transaction. We want to enable the businesses to reach their full potential. To do this, it is necessary to leave no stone unturned. Only then will we know which stones can become key pillars of thyssenkrupp. I could imagine thyssenkrupp resting perspectively on two pillars. On the one hand on companies that are 100 percent owned by thyssenkrupp. And on the other hand on businesses in which the company only has a shareholding – for example through alliances. The disposal of Elevator is an important step on the way into the future of thyssenkrupp. It means we have water under our keel again and can pick up speed. I am firmly convinced that we are on the right track.

Three questions to Peter Walker, CEO thyssenkrupp Elevator

Are you happy about the decision for Advent, Cinven and RAG foundation? What does this decision mean for the Elevator business?

Peter Walker: Our clear ambition as management team of the Elevator business is to bring the company to the next level. Consequently, we are convinced that Advent, Cinven and RAG foundation are strong partners for tk Elevator. They bring different strengths to the table and have considerable experience in the industrial and businesses service sector as well as a strong presence in Germany. I already had the opportunity to talk to our new owners and they are committed to provide funds to expand our global footprint – especially in Asia – for add-on acquisitions as well as in our products and technology. We can leverage of their global reach and their expertise in the industry and business services segment. The consortium led by Advent, Cinven and RAG foundation will actively support tk Elevator expanding its leading market position.

What are the next steps for thyssenkrupp Elevator?

Peter Walker: After the final decision by the thyssenkrupp AG, the purchase agreement between the thyssenkrupp and the consortium led by Advent, Cinven and RAG foundation has been signed. We expect a potential closing to happen latest by the end of the fiscal year. However, with the signing the transaction has not yet been completed. The transaction is subject to merger control approval – although there are no concerns that the relevant authorities have any reservations. Until we reach a successful closing, the process has no immediate effect on the daily business of tk Elevator as well as on our employees.

Is the decision good or bad news for the Elevator employees?

Peter Walker: These are definitely good news for our employees. With the successful carve-out we have reached the first milestone of operating as a stand-alone company. Now, together with Advent, Cinven and RAG foundation we will accelerate our global growth strategy and further expand our leading market position. As an independent Elevator&Escalator company we will now be able to profit even more from great entrepreneurial spirit in our organization. This is not only very good for our company and our employees who work on the future of the Elevator business every day but also for our customers. Their satisfaction is the basis of our success.

Three questions to the buyers Ranjan Sen, Managing Partner of Advent International, and Bruno Schick, Partner und Head of DACH Region of Cinven

Why do you buy the Elevator business? What are your plans for it?

Ranjan Sen: First and foremost, we highly value thyssenkrupp Elevator’s strong market position and in particular its committed and loyal employee base. We are also truly impressed by the high-tech product portfolio, technical expertise and innovation capacity. We are convinced that the elevator and escalator markets offer strong, long-term structural and resilient growth potential.

Bruno Schick: We intend to invest in the business to grow both organically and through acquisition. This includes investment in areas including international expansion, especially in China, and product innovation, such as new energy-efficient industry solutions, and plan to further expand the service business.

To achieve this growth, we look forward to continuously developing thyssenkrupp Elevator together with its highly qualified and ambitious employees. We will provide operational experience and access to capital resources, as well as to actively pursue consolidation opportunities for the business given the fragmented nature of the market.

Who are you and your partners? What is your investment philosophy and strategy?

Ranjan Sen: Advent is one of the most experienced and successful private equity companies in Germany and worldwide. With more than 350 transactions across five core sectors in 41 countries, we have consistently demonstrated our ability to be a thoughtful sponsor of businesses.

Bruno Schick: Cinven has a strong track record and history in Germany and its funds have acquired more than 50 companies in the DACH region. In the past seven years, Cinven funds’ German-headquartered portfolio companies have made 35 add-on acquisitions and currently employ almost 31,000 people.

Both of us, Cinven and Advent, have had offices in Germany for more than 20 years. We are deeply rooted in the German market – which is further supported by our local partner RAG Stiftung.

We hear that you have signed a so called best and fair owner agreement with the IG Metall union. What does this mean for the employees?

Bruno Schick: The announced acquisition and the carve-out from thyssenkrupp will not change the daily work routine or working conditions. We look forward to working together and have both operated for years as responsible investors.

Ranjan Sen: A central component of our investment philosophy is the conviction that employees are the most valuable asset. We will therefore continue to strongly invest in the training and education of all employees.

Sale of Elevator: Best solution for all stakeholders

IPO or sale - both options were prepared for months. Now it is clear: thyssenkrupp sells the Elevator business for €17.2 billion to a consortium of bidders led by Advent, Cinven and RAG Foundation. Closing of the transaction is sought by the end of September. The transaction marks a good day for thyssenkrupp. The proceeds are higher than many expected. This cash inflow lays the foundations to make the company successful again. This way, thyssenkrupp will be able to significantly reduce its debt and pension liabilities while, at the same time, invest to a reasonable extend in the transformation. With the Elevator sale, the prospects for the remaining businesses improve and allow thyssenkrupp to regain momentum.

However, thyssenkrupp takes this step with mixed feelings: The company is not pleased to part from a profitable business. Especially as almost a third of all employees will be handed over to new owners. Nevertheless: The Executive Board is convinced that the sale is the best solution – for both, thyssenkrupp and the Elevator business itself.

Today, the Supervisory Board has approved the respective Executive Board decision. The major shareholders stand united in their support for the decision.

Prof. Ursula Gather, Chairwoman of the Board of Trustees of the Krupp Foundation and member of the Supervisory Board said: “We would like to thank the Executive Board and especially the employees involved in the sales process for their intense work over the past few months. The decision made is the right one, although it is sad that thyssenkrupp Elevator cannot remain in the Group. The professionally managed process has led to a good result. Now the Executive Board has to make sure that the proceeds are used quickly and in a targeted manner so that the company can develop successfully. thyssenkrupp must become competitive and able to pay dividends again. We are convinced that thyssenkrupp has a good future. The foundation will continue to accompany you and your company on its path.”

The second largest shareholder, Cevian Capital, also welcomed the decision. Lars Förberg, Co-founder Cevian Capital, said: “With the Elevator sale, thyssenkrupp is regaining financial strength and flexibility. Each of the businesses has the potential for a fast and fundamental improvement. Now there needs to be full focus on making them operationally strong and fit for the future. Cevian Capital fully supports Martina Merz and her team in restructuring the businesses, improving their competitiveness and making them successful for the long-term benefit of all stakeholders.”

In the sales process, thyssenkrupp’s Management Board was keen to ensure that the business and the employees were placed in responsible hands. For this reason, so-called best and fair-owner discussions were held with both final bidders. In these negotiations with employee representatives and the IG Metall union, the buyers have given far-reaching site and employment guarantees. Employee co-determination will be maintained. As a result, the employee representatives are satisfied with the solution achieved.

Knut Giesler, Regional Head of IG Metall North Rhine-Westphalia: “On the one hand, it is a pity that Elevator will not belong to thyssenkrupp anymore. In the current situation, however, the sale is the right step to open up new perspectives for the entire Group. In addition, it is good for the Elevator’s employees that they now finally have a secure future. The fair and best-owner agreement secures jobs and sites in the long term. By promising to invest in innovations it also ensures the future viability of the Elevator business.”