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* Thyssenkrupp says it will seek listing of elevators unit
* Thyssenkrupp abandons cross-shareholding restructuring
* Thyssenkrupp expects joint venture with Tata Steel to fail
* Thyssenkrupp expects to post a loss for the year (Recasts with confirmation from the company)
FRANKFURT, May 10 (Reuters) - Thyssenkrupp abandoned plans to hive off its steel business and split up the rest of the German conglomerate on Friday after a lengthy battle with activist investors and regulators, opting to list its elevators division instead.
In September, Thyssenkrupp had said it would split into two separate divisions, with Thyssenkrupp Industrials spanning elevators, car parts and plant engineering, while Thyssenkrupp Materials focused on shipbuilding and materials trading.
However, Chief Executive Guido Kerkhoff ditched this proposal because Thyssenkrupp's low share price had made a cross-shareholding structure unworkable, three sources said.
The European Commission is also expected to block Thyssenkrupp's planned steel joint venture with India's Tata , leading the German company's board to reassess its options and opt "to not go ahead with the planned separation."
Thyssenkrupp said its alternative plan, which involves the Elevator Technology division listing and introducing a holding structure which allows more flexible management of its varied portfolio, will lead to a net loss for the year.
"The economic downturn and its effects on business development and the current capital market environment have led to the separation not being able to be realized as planned," Thyssenkrupp said in a statement.
Kerkhoff had failed to sustainably lift Thyssenkrupp's share price and after two profit warnings it was too low for the deal to work, leaving him scrambling for a Plan B, the sources said.
Thyssenkrupp shares rose 10 percent on Friday, on course for their best day in a decade, after Reuters reported the company was considering a partial listing of the elevators division. The shares were up 12 percent after it confirmed the plans, while Tata Steel shares were down 5.4 percent in Mumbai.
Thyssenkrupp's market value is around 6.9 billion euros ($7.7 billion), while analysts have estimated the elevators division to have an enterprise value of at least 14 billion euros.
Thyssenkrupp has been the target of activist investor Cevian, which has an 18 percent stake, and Elliott Capital Advisors, which has a smaller holding in the conglomerate.
Pressure from investors seeking to realize greater value by breaking up conglomerates led General Electric to spin off its healthcare business and Siemens to announce it will separate its gas turbines business.
Kerkhoff's idea at Thyssenkrupp was to separate higher quality capital goods operations of elevators, auto suppliers and core plant construction from its other more cyclical businesses.
Specialized businesses are often more highly valued than conglomerates because in times of growth, high-potential assets do not have to compete for the combined balance sheet with businesses offering lower returns.
But rising trade tensions between the United States and China, and fears of a disorderly Brexit have dented share prices, forcing companies including Continental and Volkswagen to review plans for spin offs and listings.
The original blueprint planned for Thyssenkrupp Materials to hold a 30 percent stake in Thyssenkrupp Industrials. But Thyssenkrupp shares have fallen by 47 percent over the past year, making it the smallest constituent of Germany's DAX index.
Under the old plans, Thyssenkrupp Materials would have held a 50 percent stake in the planned JV with Tata Steel but under the revised proposal it will reintegrate its steel business in the third quarter, resulting in a net loss for the year.
Thyssenkrupp said it now expects to post an adjusted earnings before interest and taxes of 1.1 billion euros to 1.2 billion euros, and to post negative cashflow in the high three-digit million euros range for 2018-2019. ($1 = 0.8911 euros) (Reporting by Edward Taylor, Chris Steitz, Tom Kaeckenhoff Editing by Georgina Prodhan, Keith Weir and Alexander Smith)