ACS joins Leighton tussle

Just days after chief executive Wal King left the boardroom, its 55 per cent German shareholder Hochtief has fielded a low-ball offer from its largest shareholder, the Spanish firm ACS.

The offer is likely to be rejected by the majority of Hochtief shareholders but will enable ACS which already owns 29.9 per cent of the German group to buy more shares on the market without having to make another bid.

Under German law, a company has to make a mandatory offer for all shares only when it crosses a 30 per cent threshold, leaving Hochtief all but defenceless as ACS snaps up enough shares to acquire control.

ACS said it aimed to lift its stake above 50 per cent "over time" allowing for a "full financial consolidation" of Hochtief.

"If ACS offered a higher price now for the shares, we might end up with 70 or 80 per cent," an ACS spokeswoman said. "But we don't want 70 or 80 per cent, we want just over 50 per cent for full financial consolidation."

But the process could drag on for months, with ACS required to wait until its offer period expires at the end of the year before being allowed to buy shares on-market.

In the process, the Spanish group, which does not currently operate in the Asia-Pacific region, will pick up Hochtief's interest in Leighton Holdings on the cheap.

Leighton contributed more than 80 per cent of Hochtief's pre-tax profits last year. Its market capitalisation of $10 billion is almost double that of Hochtief's.

But the uncertainty of the takeover activity and the low-ball nature of the bid have experts on their guard.

A Deutsche Bank analyst, Craig WongPan, said the ACS bid for Hochtief was, on balance, negative for Leighton given there were question marks over potential management or strategy changes, particularly given ACS's lack of exposure to Asia.

But this, he said, was tempered by ACS's public statements committing to "a strong presence on each continent and a unique foothold in the emerging markets".

A Patersons Securities analyst, Graeme Carson, said that while it was much more likely that ACS would hold on to Leighton to capitalise on Asian growth markets, there was no ruling out the prospect that they could decide to cash-in instead.

"If you get [Hochtief] cheaply then can you sell half of Leighton and make a lot of money," Mr Carson said.