Australian regulator turns down Hochtief request

The Australian Securities and Investments Commission (ASIC) has decided not to force ACS to make a follow-on bid for Hochtief subsidiary Leighton Holdings as part of the Spanish firm’s takeover of Hochtief.

The decision is a setback for Hochtief, which had hoped to convince ASIC that ACS’ takeover of the German firm was really just a proxy to acquire a substantial interest in Australian-listed Leighton, in which Hochtief owns 54.5 percent.

Hochtief has announced that it will now take the matter to Australia’s Takeovers Panel, which it describes as the “primary forum in Australia for decisions in connection with takeover offers”. ACS, for its part, has said it is confident that the Takeovers Panel will reconfirm ASIC’s decision.

Should the panel rule in favour of Hochtief, then it could force ACS to make a bid for Leighton. This would require ACS to factor in the Australian firm’s €7 billion market capitalisation, significantly increasing the cost of its current bid for Hochtief.

ACS is offering eight of its shares in exchange for five Hochtief shares in a bid to increase its shareholding in Hochtief to just above 50 percent, allowing for full financial consolidation of the German company. The bid values the 70 percent of Hochtief that ACS doesn’t already own at €2.75 billion. That means that ACS will have to spend around €800m to get a controlling stake in Hochtief.

Many observers, though, feel that Hochtief’s defence gambit will be hard to pull off as it requires a change to Australian law.

Under Australian law, takeover bids of foreign companies that have substantial interests in downstream firms listed in Australia do no need to make a follow-on bid for the downstream companies as long as the takeover offer complies with the rules of stock exchanges approved by ASIC.

Since this is the case with the German exchanges Hochtief is listed on, many observers think it unlikely that regulators will open an exception, considering that ACS’ takeover bid is legally compliant with Australian law.

In related news, the German government has also signalled that it will not intervene in the takeover bid. German economics minister Rainer Bruederle told reporters yesterday that “we would like for Hochtief to stay in Essen, and that as many taxes as possible are paid in Germany”. But he stressed he is “not intervening in the market process, as many reports state”.