Hochtief readies defence against ACS takeover

German infrastructure group Hochtief is stepping up its defences against a recently announced takeover bid from its largest shareholder, Spanish construction company ACS.

Hochtief: ACS offer of 'no value to shareholders'

Its latest move has been to set up a special committee on its supervisory board to deal with the takeover bid, excluding the two members of ACS that currently sit on the board. A spokesman from Hochtief said the decision sought to avoid any conflicts of interest regarding the company’s response to the takeover offer. It will also prevent ACS’ board members from being privy to Hochtief’s strategy.

In addition, Hochtief has hired Goldman Sachs, Credit Suisse and Deutsche Bank to advise it on its options regarding the takeover.

ACS told the Spanish regulator on September 16 that it was planning to launch an all-share bid to acquire the remaining 70 percent of Hochtief it doesn’t already own. The offer would comprise eight ACS shares for every five shares in Hochtief. Based on Hochtief’s closing price on September 15, ACS’ offer values a 70 percent stake in Hochtief at €2.75 billion.

Hochtief’s reaction to ACS’ takeover bid has been negative, with chief financial officer Burkhard Lohr saying at a recent investment conference in Germany that Hochtief viewed the offer as “unsolicited” and of “no value to Hochtief shareholders”. He also added that the takeover bid was “not in line with the perceived relationship”. A spokesman from the company explained that ACS had said repeatedly over the last years that it had no intention of raising its stake in Hochtief above 30 percent.

Lohr said ACS is seeking to “increase [its] shareholding [in Hochtief] to just above 50 percent allowing for full financial consolidation”, which would lead to a “notional improvement of ACS leverage through full consolidation of Hochtief”. He added ACS “would use only treasury stock and borrowed shares” to pay for the bid, precluding the need for a capital increase. He contended Hochtief is better off as a standalone business.

In terms of the timeline going forward, Lohr said he expected ACS to file a final offer document with the German authorities no later than October 14 with official publication expected on November 2. A four-week acceptance period would follow with the publication of a tender result set for the beginning of December. On top of that, an additional two-week acceptance period may follow with publication of a final tender result to take place around December 23, Lohr explained.

A spokesman from Hochtief has confirmed to Infrastructure Investor that ACS has yet to submit its offer with the German authorities.

ACS has been divesting some of its assets in order to reduce its debt pile, recently selling a 15.6 percent stake in toll road operator Abertis to private equity firm CVC Capital Partners for €1.7 billion. Prior to that deal, it had divested its ports unit – Dragados Spl – to JP Morgan for €720 million.
 
Hochtief is Germany’s largest construction company and also runs a very profitable construction business in Australia via subsidiary Leighton Holdings. Hochtief’s stock was trading at €57.84 at 11.28am on the Frankfurt Stock Exchange, a 2.46 percent gain on yesterday’s closing price. 

The German firm had tried late last year to do an initial public offer for its concessions unit in a bid to raise €1 billion. But last year’s “Dubai crisis” and its impact on world markets ultimately derailed Hochtief’s efforts.