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Atlas Copco announces split as chief resigns

Atlas Copco is to split itself in two and appoint a new chief executive as Sweden’s largest industrial group tries to boost shareholder value. 

The Wallenberg-backed company is hoping to spin off its mining and construction tools business after a tough period following the slump in commodities market. That would leave the existing Atlas Copco to focus on compressors, vacuum technology and its big service business, which have higher margins and are growing faster. 

Ronnie Leten, the Belgian manager who has transformed Atlas into Sweden’s most valuable industrial company in his eight years as chief executive, has resigned and will be replaced by Mats Rahmstrom, the current head of the group’s industrial technique business. 

The radical move is the latest in a series of changes in Swedish industry, following a split at SCA and chief executive changes at Volvo Group, Scania and Atlas’ domestic rival Sandvik. 

Shares in the new company, yet to be given a name, will be distributed to Atlas’ existing investors. It had about a quarter of the group’s revenues and an operating margin of 16 per cent in the year to end of September. The rest of Atlas Copco had an operating margin of 20 per cent over the same period and is focused on industrial customers. 

“The board and management believe that long-term shareholder value will be created by splitting the group into two separate companies. Both businesses are global leaders in their respective fields and will benefit from a more focused management responsibility,” said Hans Straberg, chairman. 

The split is backed by Investor, the Wallenberg family investment vehicle that is Atlas’ largest shareholder with almost a quarter of voting rights. “As a long-term strategic owner of Atlas Copco, we believe that the intended split is a natural and logical next step, creating two focused, market-leading companies with strong platforms for continued profitable growth and long-term value creation for their shareholders”, said Johan Forssell, chief executive of Investor. 

Ben Maslen, analyst at Morgan Stanley, greeted the split as a bold and surprising move but said it was less about unlocking hidden value. “Rather we see it a way of remaining focused on value creation, allowing management to not be spread too thinly and avoiding becoming a ‘conglomerate’. From a capital allocation perspective it makes sense to us,” he wrote in a note to investors. 

Mr Leten has been pursuing growth in vacuum technology — used by chipmakers and smartphone manufacturers to create a clean factory environment — as well as in the more profitable services business that now makes up nearly half of Atlas’ revenues. Under his time in charge, Atlas increased its market capitalisation by more than any other listed Swedish company.

Klas Bergelind, analyst at Citi, said he thought the new company focused on mining could become an acquisition target as relatively little deal activity had occurred following the commodity crash.

Via FT