Hedge Funds Pile Into Klöckner & Co as Investors Bet on Heftier Payout

Institutional investors like DWS and Goldman Sachs position for a sweeter deal as Klöckner shares trade 14% above Worthington Steel's €11 offer, with a domination vote set for May 2026.

The takeover of Klöckner & Co by Worthington Steel appeared all but sealed when the US group secured a 59% stake by the end of March. Yet a flurry of disclosures from major shareholders on Friday afternoon suggests the game is far from over — and that institutional money is positioning for a sweeter deal.

DWS Investment GmbH revealed it now holds just over 3% of the Duisburg-based steel distributor’s shares, joining a growing list of investors betting that the final payout will exceed the original €11 per share offer. Goldman Sachs also retains a significant holding, according to a voting rights notification filed on April 21.

The stock currently trades at €12.58, exactly matching its 12-month high and sitting more than 14% above the bid price. Since the start of the year, the shares have surged roughly 54%, a rally that reflects market expectations that the mandatory independent valuation triggered by the planned domination and profit transfer agreement will produce a higher compensation figure.

Domination Agreement on the Horizon

Worthington Steel, which already controls 58.8% of outstanding shares, has formally notified Klöckner’s management of its intention to enter into a domination and profit transfer agreement. The vote on that deal is set for the 20th ordinary annual general meeting on May 20, 2026 — a formality given the US group’s commanding majority.

Such an agreement is no routine matter. German law requires an independent company valuation to determine both the compensation and the guaranteed dividend for minority shareholders. Those outside shareholders also retain the right to challenge the valuation in court if they deem it too stingy.

Once the transaction receives regulatory clearance — expected in the second half of 2026 — Worthington Steel is weighing a squeeze-out if its stake reaches 90%. A delisting is also under consideration.

Two Key Dates in May

Klöckner’s calendar is packed for the coming weeks. On May 6, management will publish its first-quarter interim report, offering a window into the company’s earnings power amid a volatile steel market. The guidance for Q1 2026 points to EBITDA before special items in a range of €20 million to €60 million — a wide spread that underscores the uncertainty.

The operating backdrop is unusually favorable. US tariffs on steel and aluminum are expected to boost earnings in the second and third quarters. Klöckner had purchased inventory at lower price levels and now benefits from the elevated pricing environment in the US. Management sees no negative tariff impact, noting that what it sells in America is typically sourced domestically.

For the full year, the board anticipates stable sales volumes despite recent divestitures and a "clearly rising" EBITDA. The portfolio has shifted: eight US distribution sites and the Brazilian subsidiary have been sold, while new additions include Haley Tool & Stamping in the US and Ambo Stahl in Germany, both focused on defense and higher-value processing.

Two weeks after the quarterly report, on May 20, shareholders will gather for the annual meeting. The board has proposed a dividend of €0.20 per share, which would flow to investors shortly after approval.

The Waiting Game

For remaining shareholders, the math is straightforward. If the independent valuation sets the compensation above €11, holding the stock will have paid off. The current share price suggests the market expects exactly that outcome — and major investors are using the window before the AGM to strategically align their voting rights.

As long as the speculation over a fatter payout under the domination agreement persists, Klöckner’s share price looks well-supported. The real test comes when the valuation lands.