ACS to gain control of Hochtief

Spanish construction firm ACS has announced that its takeover bid for Germany’s Hochtief has proved successful. ACS needed to own at least 30% of Hochtief’s shares by today’s final deadline in order to acquire control of the target on the open market. It has 33.49%.

Actividades de Construcción y Servicios (ACS), the Spanish infrastructure developer, today announced it has a 33.49 percent shareholding in German construction firm Hochtief. This is above the 30 percent threshold that ACS needed in order to gain control of Hochtief on the open market without paying a premium.

The likely success of the deal has been known for some time. In its latest prior update, ACS said on 21 January that it had accumulated a shareholding of 31.59 percent – having already passed the 30 percent threshold earlier in the month.

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 – which valued the target at €4.9 billion – 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, Southeastern Asset Management, which was 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.

In a further twist, it then emerged that German financial regulator Bafin was investigating Southeastern Asset Management’s actions for evidence of collusion between it and ACS. However, towards the end of last month, Bafin determined that there had been no such irregularities.