ACS cements hold on Hochtief

Following completion of its takeover offer on January 18, the Spanish group has increased its stake in Hochtief to 31.6%, further crossing the 30% threshold that will allow it to acquire control of the German firm on the open market.

Spanish infrastructure group ACS has tightened its grip on Hochtief by disclosing that it now owns 31.6 percent of the German firm.
 
The announcement follows the expiry of ACS’ takeover offer for Hochtief, which values the company at €4.9 billion, on January 18. In aggregate, 4.34 percent of Hochtief’s shareholders have taken ACS up on its offer since it was green lighted by the German regulator in late November. Still, under German law, investors who have tendered their shares to ACS have seven days after the closing of the offer to withdraw their tenders.
 
This means ACS will only know its final holding in Hochtief in early February. If, at that time, its holding is still above 30 percent, the Spanish company is then free to pursue a majority stake in Hochtief on the open market, without paying a premium for control.
 
Under German law, companies are required to make a compulsory takeover bid once they amass a 30 percent stake in a firm. However, if the takeover offer fails to provide them with majority control of the target, companies are free to buy a controlling stake on the open market, without having to renew their takeover offer.
 
ACS pre-empted the mandatory offer by launching a voluntary takeover of Hochtief just as its shareholding in the German company was closing in on 30 percent. It offered a deliberately lowball bid, which it subsequently improved, with a view to acquiring just enough shares to cross the 30 percent threshold, freeing it to acquire majority control without paying a premium.
 
The Spanish group has always said that its goal is to increase its shareholding in Hochtief to just above 50 percent, allowing for full financial consolidation of the company and helping it to cut debt. Majority ownership will also allow the company to increase its geographical exposure, moving away from the troubled Spanish market, from which it derives the majority of its sales.
 
Hochtief tried to fend off ACS’ bid from the very beginning, but its lines of defence gradually fell one by one. First, it tried appealing to Australian regulators to force ACS to also acquire Hochtief subsidiary Leighton Holdings, which is said to have a market capitalisation of around €7 billion. Then it tried tapping German politicians for help, but none was forthcoming.
 
Finally, it sold a 9.1 percent stake in the company to an investment vehicle of Qatar. Even though Hochtief never explicitly made the connection, this had the side effect of diluting ACS’ original stake in Hochtief, making it harder and more expensive for the Spanish company to acquire it.
 
Unfortunately for Hochtief, the Qatar deal proved to be its undoing, when one of its largest shareholders, dissatisfied with the sale, decided to tender more than 2 percent of Hochtief to ACS, giving it the decisive boost it needed to cross the 30 percent threshold in the German firm.