Leighton to reassure market
But crucially, a key figure in the board ructions, Hochtief's executive chairman Marcellino Fernandez Verdes, said Leighton's German majority shareholder was "free to reconsider these matters at any time if it so chooses".
Shaken by the savage market reaction following the resignation of chairman Stephen Johns and directors Ian Macfarlane and Wayne Osborn on Friday, Hochtief is understood to be keen to reassure the market that it remains committed to Leighton's board independence - especially due to its importance to credit markets and minority investors.
"It's a function of how much pressure is put on [Hochtief]," a former Leighton director told BusinessDay. "It's much better for Leighton to be seen as an independent company where the independent directors have the voting power."
Credit rating agency Standard & Poors reacted negatively to the directors' resignations.
Leighton bond offer documents also warn of negative consequences to its credit profile if it is not viewed as independent from the debt-laden ACS and Hochtief.
While the independence agreement Hochtief had historically adhered to was never legally enforceable, it had given investors comfort, until the German group was taken over by Spanish giant Grupo ACS.
Leighton is expected to advise the stock exchange of its new chairman before the market opens on Monday. An emergency board meeting was convened after chairman Stephen Johns and the fellow directors resigned on Friday, citing an irreparable "breakdown in relations" with an ACS-controlled Hochtief.
But Hochtief said it remained committed to Leighton's existing strategic objectives and that it did not consider itself to have "done anything to undermine the independence of the Leighton board or threatened any such action".
In a letter to his fellow Leighton board members, Mr Fernandez Verdes, a long-serving ACS executive, said "it is quite incorrect" for Mr Johns to have claimed Mr Fernandez Verdes had interfered in the appointment of a new independent director - a key flashpoint which saw relations within the board rapidly deteriorate over the past three months.
Mr Fernandez Verdes said Hochtief had no intention of altering a set of "informal and non-binding" governance principles that include a Leighton board structure in which the majority of directors are independent.
But the independent directors were concerned that Mr Fernandez Verdes had put forward a hand-picked candidate to be installed as an independent director.
Frequently Asked Questions about this Article…
Three independent directors — chairman Stephen Johns and directors Ian Macfarlane and Wayne Osborn — abruptly resigned, citing an irreparable “breakdown in relations” with an ACS-controlled Hochtief. Their departures triggered a sharp market reaction and prompted an emergency board meeting.
Investors care because the resignations raised doubts about whether Leighton will remain independent of its German majority shareholder Hochtief (now influenced by Grupo ACS). Independence is important to credit markets and minority investors, and the resignations prompted concerns about potential influence from Hochtief or ACS.
Credit rating agency Standard & Poor’s reacted negatively to the resignations. Leighton’s bond offer documents also warn that its credit profile could be harmed if the company is not viewed as independent from debt-laden ACS and Hochtief.
Hochtief said it remains committed to Leighton’s existing strategic objectives and denied doing anything to undermine the Leighton board’s independence. Its executive chairman, Marcellino Fernandez Verdes, said Hochtief had no intention of changing the informal governance principles that aim for a majority of independent directors.
Marcellino Fernandez Verdes is Hochtief’s executive chairman and a long-serving ACS executive. He wrote to Leighton board members denying that he interfered in the appointment of a new independent director and said Hochtief was free to reconsider matters if it chose to do so.
No. The article notes the independence agreement Hochtief had historically followed was never legally enforceable — it was informal and non-binding — but it had given investors comfort until Hochtief’s takeover by Spain’s Grupo ACS.
Leighton convened an emergency board meeting and was expected to advise the stock exchange of its new chairman before the market opened on the following Monday.
Watch official announcements to the stock exchange (including the appointment of a new chairman), any further statements from Hochtief or ACS about governance, updates from credit rating agencies like Standard & Poor’s, and disclosures in Leighton’s bond documents about its credit profile and independence.
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