Shares in ThyssenKrupp AG (TKA.XE) rose sharply Friday after Germany's largest steelmaker by output late Thursday announced a comprehensive reorganization of its business that includes the divestment of large parts of its auto supplier business and a spinoff of its stainless steel unit.

ThyssenKrupp shares gained more than 7% in early trading Friday as analysts said they expect the announced measures should help increase the company's profitability and reduce debt.

At 1012 GMT ThyssenKrupp shares traded EUR1.97 higher or 6.6% at EUR31.80, outperforming a firmer broader market.

Credit Suisse analyst Michael Shillaker said in a note to clients that the restructuring is "more revolution than the slow evolution we expected", adding it "will unlock significant shareholder value".

Shillaker has an outperform rating on ThyssenKrupp shares, which are his top pick in the steel industry.

The strategic shift foresees the sale of assets with a total revenue volume of around EUR10 billion ($14.8 billion) and some 35,000 employees.

In fiscal 2010 which ended Sept. 30, ThyssenKrupp recorded revenue of EUR42.62 billion. At the end of its last fiscal year it employed around 177,000 people.

Shillaker estimated that the flagged asset sales could reach between EUR5 billion and EUR8 billion of proceeds, saying this would be the largest single divestment program at ThyssenKrupp since it considered an initial public offering of its steel business in 1999/2000.

The proposed reorganization comes less than four months after Chief Executive Heinrich Hiesinger took charge of Germany's largest steelmaker by output.

Hiesinger is a former manager of engineering company Siemens AG (SI). Observers had expected that he would shift emphasis more toward ThyssenKrupp's non-steel business. The steelmaking activities had been the company's main investment focus in the last few years with billions of euros spent on new steel mills Brazil and the U.S.

A spinoff of ThyssenKrupp's stainless steel business would follow a similar move by ArcelorMittal (MT) earlier this year. The world's largest steelmaker by output spun off its stainless business named Aperam in January.

The global stainless steel industry has been facing considerable structural headwinds with production overcapacities in the wake of the global recession and pressure on base prices as well as alloy surcharges.

So far any consolidation attempts have failed, but ThyssenKrupp's comments that it would consider "potential strategic partnerships" could refuel investor hopes that mergers might be possible in future.

A spinoff of the stainless business would mark a shift from November when company officials said they wanted to keep running the business. ThyssenKrupp now said a spinoff would provide "the opportunity to develop its competitive position with greater flexibility" and reduce costs.

The company didn't say what form of spinoff it is considering, but added that "all options regarding the continuation of its business activities outside the group are to be investigated".

The Stainless Global division recorded sales of EUR5.9 billion in fiscal 2010.

The steelmaker and industrial conglomerate also said the new set of restructuring measures to be proposed to the company's supervisory board next Friday aims at strengthening its engineering business and seizing growth opportunities in emerging markets.

Its management intends to strengthen the focus of its automotive businesses by selling some units that supply carmakers and merging others.

Commerzbank analysts Ingo-Martin Schachel--who recommends buying ThyssenKrupp shares--said that the plan to revamp the automotive supplier business should help turn ThyssenKrupp's Components Technologies business area into a higher margin business.

"A potential deconsolidation of all the mentioned units would likely lead to an improvement of the group margin by around 50 basis points," Schachel said.

-By Jan Hromadko, Dow Jones Newswires; +49 69 29 725 503; jan.hromadko@dowjones.com
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