STOCKHOLM (Reuters) - Shares in Ericsson (ERICb.ST) rose on Thursday after Assa Abloy (ASSAb.ST) said CEO Johan Molin may step down next year, fanning speculation he could be the telecom gear maker’s next chairman.
Molin, one of Sweden’s most highly regarded top executives, told Reuters that he had not been asked to become chairman of Ericsson, but he did not eliminate the idea.
“It’s a hypothetical question that I don’t want to answer. It’s not on the cards for me, at least not today,” Molin told Reuters by phone when asked if he ruled out such a move.
Ericsson has been struggling for years, hit by a drop in spending by telecoms firms, growing competition from China’s Huawei [HWT.UL] and a resurgent Nokia (NOKIA.HE).
It appointed a new CEO, Borje Ekholm, a year ago, but activist investor Cevian Capital has been calling for further change.
Shares in Ericsson were up 2 percent by 1200 GMT as analysts said news of Molin’s likely departure from Assa Abloy had increased the likelihood that he will be Ericsson’s next chairman.
Swedish media and analysts see Molin, CEO at Assa for 12 years, as one of three potential candidates with the right credentials to replace current chairman Leif Johansson, who said in July that he plans to quit next year. The other two are Ronnie Leten, previously CEO of Atlas Copco, and Autoliv CEO Jan Carlson.
Assa Abloy said it issued its statement about Molin “due to market rumours.” It did not clarify any details about the rumours and made no mention of market speculation about a move to Ericsson.
“Against this background, the board has begun the work on evaluating potential successors to Johan Molin and has also appointed an external recruitment consultant,” it said.
Assa Abloy Chairman Lars Renstrom said in an email that Molin had initiated the discussion about leaving, and the company’s shares had tumbled 5 percent by 1243 GMT.
“Mr. Molin’s impact on Assa is difficult to overstate,” ABG Sundal Collier said in a research note.
Molin has grown sales sharply at Assa Abloy over the past decade through scores of acquisitions and robust organic growth, while maintaining a strong double-digit operating margin.
“It feels like good timing now that we have both stable growth and stable earnings, and I have been CEO for 12 years. It’s time to consider doing something else,” Molin told Reuters.
Renstrom said that after 12 years it was natural for Molin to consider stepping down and the board was looking at both internal and external successors.
Since Molin became CEO in late 2005, Assa Abloy shares have sharply outperformed the Stockholm stock exchange's blue-chip index OMXS30 .OMXS30 and the European sector index .SXOP.
The shares, however, have treaded water over the past year as the discovery of accounting irregularities at the company’s Chinese business and a weak Chinese market have weighed.
“His departure is clearly a setback for the stock, not least as it comes on the back of questions over the governance in its Chinese operations in 2016 and senior management departures in 2017,” Barclays said in a note.
Molin is also chairman of Swedish engineering group Sandvik (SAND.ST) and the company has seen a sharp rebound in its share price since he took the post in 2015.
Reporting by Olof Swahnberg, Helena Soderpalm and Johannes Hellstrom; Editing by Susan Fenton