German construction and engineering giant Hochtief has launched a $1.155 billion off-market offer to increase its ownership stake in Leighton Holdings to just under 75 per cent and increase its board representation.
Investors cheered the news, sending Leighton shares 10.62 per cent higher to $22.92 at 11.44am (AEDT), against a benchmark index fall of 0.79 per cent.
Hochtief, which currently holds 59 per cent of Leighton, has offered to buy three out of every eight shares held by other Leighton shareholders for $22.15 cash each.
The offer comes after Leighton on Friday deflected an ASX price query, saying it was unaware of any reason for a $2 surge in its share price in two days.
The construction group's shares closed at $18.21 on Wednesday, then lifted to $20.26 when the ASX contacted Leighton.
This represents an 18.8 per cent premium over the dividend-adjusted five-day volume weighted average price of $18.65 per share.
Hochtief took a majority holding in Leighton in 2001, after gradually acquiring an interest since 1981.
Hochtief will increase its stake from almost 59 per cent per cent to over 74 per cent per cent if all shareholders accept the conditional, proportional off-market offer.
Bloomberg reports Hochtief will consider a full Leighton takeover in the future.
The German group said it intends to increase its representation on Leighton's board to reflect its shareholding, adding it continues to support the independent chairman Robert Humphris.
Hochtief said it will work with the board to complete a review of its operating model that is currently underway, focusing on whether its operations can be more efficient, and will pursue these changes whether or not it can increase its holding.
The majority shareholder said it sees benefit in Leighton keeping its ASX listing and an Australian head office.
Leighton shareholders on the register on March 21 will be entitled to a dividend of 60c per share, 50 per cent franked, which was declared on February 20. The dividend will not be deducted from the offer price payable to shareholders who accept the offer.
Hochtief said the offer will be funded from existing money market and invest funds at call, as well as undrawn facilities available.
The deal is conditional on the Treasurer advising he has no objections under the Foreign Acquisitions and Takeovers Act.
Hochtief expects to dispatch its bidder's statement by the end of March.
JP Morgan is acting as financial adviser to Hochtief and Ashurst is acting as legal adviser.
In a separate statement, Leighton said its directors will consider the bid and advise minority shareholders in due course.
In October, Leighton shares fell 10 per cent 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 per cent to $508.7 million in full-year 2013.