Leighton Holdings (LEI) chief executive officer Hamish Tyrwhitt and chief financial officer Peter Gregg have had their positions at the company terminated, effective immediately, as majority shareholder Hochtief sweetens its offer to lift its holding in the construction group to $22.50 per share.
Mr Tyrwhitt will be replaced by Hochtief CEO Marcelino Fernandez Verdes, who has been appointed on terms and conditions to be determined by the board.
In a coup for Hochtief, two additional representatives, Pedro Lopez Jimenez and Jose Luis del Valle Perez, will also join the Leighton board, while current directors Paula Dwyer, Russell Higgins and Vicki McFadden will resign by the company's May 19 annual general meeting.
Robert Humphris will remain as independent chairman with a casting vote, bringing the new board's composition to five non-executive independent directors, four non-executive Hochtief nominees and the CEO.
Leighton has agreed to Hochtief's request earlier this week for the termination of the executives' positions, recognising Hochtief could achieve board control at the AGM.
The overhaul is a long-fought victory for Spanish construction giant Grupo ACS, which controls Hochtief, as it seeks to integrate Leighton more closely into its global operations.
Investors were largely unfazed by the developments. At 1.05pm (AEDT) Leighton shares were 0.36% lower at $22.16, against a benchmark index lift of 0.67%.
Hochtief sweetens offer
Meanwhile, Leighton and Hochtief have entered a bid implementation agreement, with Hochtief increasing its offer to $22.50 per share for three out of eight shares, compared with an offer of $22.15 per share earlier this week.
The offer follows negotiations between Hochtief and Leighton's independent non-executive directors, who pressed the majority shareholder to make a takeover offer for all shares, which Hochtief declined.
Leighton said the sweetened offer is a premium of 35.1% over the three month volume weighted average price to March 7, the last trading day before the offer.
The offer is unconditional expect for a requirement for Foreign Investment Review Board approval.
Shareholders on the register on March 21 will be entitled to receive a 60c per share dividend, payable on April 4.
"In difficult circumstances, the independent directors have secured an improved offer which, we believe, is the best outcome for Leighton’s shareholders and employees," Mr Humphris said.
"Given the voting rights held by Hochtief, and its stated intentions, the independent directors recognised that control of the board and management would pass to Hochtief at the AGM.
"In light of this minimising the disruption to Leighton, its clients, suppliers and 56,000 employees is in the best interests of shareholders."
Former CEO, CFO to receive termination payments
Mr Tyrwhitt will be paid 12 months' average base salary and he will be provided an office and executive assistant during that time.
He will receive a cash short-term incentive of $1.1 million in April as previously scheduled, after earning this for 2013.
Mr Tyrwhitt will also pocket a $10.3m payment in place of his unvested equity awards, including long-term incentives, pending shareholder approval.
His post-termination restraint provisions will apply for a group of competitors.
Mr Gregg will also be paid 12 months' salary and receive an office and assistant during that time.
His 2013 short-term incentive of $908,100 will be paid as scheduled in April.
Mr Gregg will take home an $8.2m payment in place of his unvested equity awards, including long-term incentives, if granted shareholder approval, and will face similar post-termination restraint provisions.
The chairman thanked Mr Tyrwhitt and Mr Gregg for their leadership.
"I am personally grateful for the dedication, drive and leadership Hamish has shown during his 27 years of distinguished service with the group and for Peter’s excellent contribution to our financial and strategic direction through a challenging time in the company’s history," Mr Humphris said.
In October, Leighton shares fell 10% after media reports the company was aware of extensive bribery, corruption and cover-ups in its international divisions.
The Australian Securities and Investments Commission said last month it was assessing recent trades made by Hochtief to find out whether its representatives on the Leighton board were aware of price sensitive information.
In March last year, three directors resigned from Leighton's board after a breakdown in relations with Hochtief. Leighton appointed three replacements in June.
Leighton lifted full-year net profit by 13% to $508.7 million in full-year 2013.