Thyssenkrupp CEO Guido Kerkhoff said Monday that splitting up the engineering company was the only way to give shareholders the best value for money.
"We have clearly analyzed all options that are on the table and, for us, the highest value-accretion for our shareholders was clearly this way of splitting the company," the chief executive told CNBC's "Squawk Box Europe." "If you really look into valuation, the multiples we get as a group, they are largely still steel and materials-driven."
It emerged Thursday that Thyssenkrupp was planning to spin off its elevators, car parts and plant engineering divisions, following years of shareholder pressure. The proposal was approved by the firm's supervisory board on Sunday and Kerkhoff was appointed permanent CEO, having been interim chief executive since July, and Bernhard Pellens was named chairman.
On Monday, Kerkhoff told CNBC that he hoped Thyssenkrupp could now enjoy much higher valuations and better profitability.
Thyssenkrupp has been facing pressure from activist investors for years. Sweden's Cevian Capital, the group's second largest shareholder with an 18 percent stake, has long been calling on management to improve performance and boost shareholder returns.
Kerkhoff said that the management board found "unanimous support from all involved parties, including the unions" to split Thyssenkrupp. He added that their backing gave him a clear, strong mandate to realize the plans.
The new strategy comes after several attempts to simplify the business. Under previous CEO Heinrich Hiesinger, who quit in July, Thyssenkrupp slimmed down significantly. The group also entered into a joint venture with Tata Steel. Despite these efforts, the stock has continued to trade at a significant discount to peers.
The split is expected to complete in the next 12 to 18 months. Management is focusing on the major steps required to separate the corporate entities but Kerkhoff said he does not see any major hurdles as they will not need big approvals from anti-trust regulators.
Analysts appeared to welcome the move, but also acknowledged that execution risks remain.
"We think the split makes sense. But we also think that the split will not create value quickly," Christian Obst, analyst at Baader Helvea, said in a note published last week.
Shares rallied as much as 17 percent on the news, but have since pared back gains.
Elsewhere, Kerkhoff said he did not anticipate Thyssenkrupp to be significantly impacted by U.S. trade tariffs.