Hochtief takes hit in buyout war

THE parent and major shareholder of Leighton Holdings, German construction group Hochtief, has lost its biggest battle yet in its takeover war against Spanish predator ACS.

By InvestSMART · 1 Dec 2010

By InvestSMART ·
1 Dec 2010

THE parent and major shareholder of Leighton Holdings, German construction group Hochtief, has lost its biggest battle yet in its takeover war against Spanish predator ACS.

Germany's financial regulator, BaFin, approved ACS's offer for Hochtief late on Monday, pushing the change of ultimate control of Leighton another step closer.

In a statement, BaFin said it had requested "significant improvements" to the offer document from ACS during its review, which were subsequently met.

ACS, which already owns just under 30 per cent of Hochtief, will begin issuing offer documents to target shareholders today.

It is believed the improvements referred to include BaFin's request for ACS to seek a capital increase from shareholders.

BaFin had been concerned that ACS would be unable to finance its bid in the unlikely event that all Hochtief shareholders took up the low-ball offer.

ACS has offered an 8-for-5 non-cash share swap priced deliberately below the prevailing market price with a view to creep above Germany's 30 per cent mandatory takeover threshold.

After a four-week offer period, ACS will then be free to gradually purchase stock on-market to reach its desired shareholding of a little more than 50 per cent, allowing it to consolidate Hochtief on its balance sheet, and gain effective control of Leighton.

A feature of the takeover battle has been the aggressive defence led by Hochtief, but the German company is seen to be running out of bullets. Hochtief failed last month to convince Australian regulators to intervene on the basis that the Spanish group was merely using the bid to gain control of Leighton, which contributed about 80 per cent of Hochtief's earnings last year and dwarfs its parent in size.

While Leighton initially followed Hochtief's lead by asking the Australian Securities and Investments Commission and the Takeovers Panel to intervene, it has since backed off after obtaining a formal guarantee from ACS to preserve its independence if the Spanish company gains control.

"We won't be getting in the road of the ACS-Hochtief play; that doesn't mean Hochtief won't make any other moves, but they haven't spoken to us about it," a Leighton spokesman said.