By Christoph Steitz and Tom Käckenhoff

The move follows months of turmoil at the elevators-to-submarines group, including a profit warning and pressure from activist shareholders Cevian and Elliott, and paves the way for the company's largest restructuring in decades.

Bernhard Pellens, a member of Thyssenkrupp's supervisory board since 2005, was unanimously appointed as new chairman to replace Ulrich Lehner, who left the group in July less than two weeks after CEO Heinrich Hiesinger quit.

Guido Kerkhoff, 50, was appointed CEO on a five-year contract, Thyssenkrupp said, confirming him in a role he had been filling on an acting basis since Hiesinger's resignation.

"I would like to thank the supervisory board for the confidence and the clear support it has given to the planned new set-up of Thyssenkrupp proposed by the executive board," Kerkhoff said in a statement.

"Our solution is responsible and equally serves the interests of employees, customers and shareholders. We will now decisively start implementation."

Under the planned structure, Thyssenkrupp will spin off its capital goods business - elevators, car parts and plant engineering - into a separate listed entity called Thyssenkrupp Industrials.

Materials trading, shipbuilding and the group's 50 percent stake in a planned joint steel venture with Tata Steel will remain part of Thyssenkrupp, which will be renamed Thyssenkrupp Materials.

Reuters was first to report last Thursday that Thyssenkrupp was considering a major overhaul, including a separation of business units.

Based on pro-forma figures for 2016/17, Thyssenkrupp Industrials had adjusted earnings before interest and taxation of 1.2 billion euros ($1.4 billion), while Thyssenkrupp Materials made 550 million euros, according to investor slides published on Sunday.

"COURAGEOUS STEP"

Thyssenkrupp Materials will initially hold a minority stake in Thyssenkrupp Industrials, which it will sell down completely at some point, the charts showed.

A framework deal between management and labour representatives rules our forced layoffs, supervisory board member Susanne Herberger told Reuters.

Approval for the landmark move, announced by the company later on Thursday, was widely expected after it was backed by the Alfried Krupp von Bohlen und Halbach foundation and Cevian, Thyssenkrupp's two largest shareholders, and labour representatives.

The three parties account for 13 seats of the 20-member board, where two seats are vacant after the departure of Lehner and former Deutsche Telekom Chief Executive Rene Obermann.

The supervisory board's nomination committee will continue its search to fill the two vacancies. Sources have told Reuters that Cevian, already represented by Jens Tischendorf, was looking to take a second board seat.

"With the new set-up, Thyssenkrupp is taking a courageous step forward. Thyssenkrupp now has a convincing plan to bring businesses closer to their customers and increase their performance," Pellens, 62, said.

A professor of business administration and international accounting at the Ruhr University Bochum and honorary professor at Tongji University Shanghai, Pellens also serves as the chairman of the board's audit committee.

Ingo Speich, fund manager at Thyssenkrupp shareholder Union Investment, cautioned that Pellens' board membership should not exceed 15 years, 13 of which have already passed.

"Pellens may be acceptable as supervisory board chairman given the difficult circumstances and the fact that some candidates turned down the job. But he has never led a company and, therefore, can only be an interim candidate," Speich said.

Cevian's Tischendorf was also appointed to the audit committee, a person familiar with the matter said.

Ursula Gather, head of the Krupp foundation, Thyssenkrupp's largest shareholder, welcomed the appointments of Kerkhoff and Pellens. She added that Pellens had successfully supported and shaped many strategic decisions during his time on the board.

(Editing by Douglas Busvine, Jane Merriman and Adrian Croft)

By Christoph Steitz and Tom Käckenhoff