Leighton Holdings, majority owned by German infrastructure group Hochtief, has lodged an appeal with Australia’s Takeovers Panel to try and stop Spanish firm ACS from gaining control of it via a takeover bid for parent company Hochtief.
Hochtief: gets boost from
Parent company Hochtief had already submitted a similar request to the Takeovers Panel last week. Both companies are trying to convince the regulator that ACS’ takeover of Hochtief is really just a proxy to acquire a substantial interest in Leighton, in which Hochtief owns 54.5 percent, without having to make a fully priced bid for the Australian construction firm.
For Hochtief, a favourable decision from an Australian regulator could help fend off an unwanted takeover from ACS – its biggest shareholder – by forcing it to also bid for Leighton, which has a market capitalisation of €7 billion, making a takeover prohibitively expensive. Leighton, for its part, is interested in retaining its independence and making sure ACS does not gain control of the company on the cheap.
“The primary interest of Leighton’s independent directors is to ensure the protection of Leighton’s minority shareholders. Although Hochtief owns 54.5 percent of Leighton, Leighton is not in the normal position of a controlled ‘downstream’ entity. Under the current governance arrangements between Hochtief and Leighton, Leighton operates under an independent board and management,” David Mortimer, Leighton’s chairman, wrote to the Takeovers Panel.
Mortimer continues: “If ACS succeeds in gaining control of Hochtief, control of Leighton will pass in a substantive and practical sense for the first time without ACS having committed to a governance regime that provides for Leighton’s independence.” ACS had previously tried to reassure Leighton, saying that it has no intention of interfering with Leighton’s management.
Under Australian law, takeover bids of foreign companies that have substantial interests in downstream firms listed in Australia do not 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 allow an exception, considering that ACS’ takeover bid is legally compliant with Australian law.
The Australian Securities and Investments Commission (ASIC), a regulator to which Hochtief and Leighton had applied to earlier on the issue, announced last week that it would not force ACS to make a follow-on bid for Leighton as part of the Spanish firm’s takeover of Hochtief.
ACS is offering eight of its own shares for five Hochtief shares in a bid to take over the German company. That values the 70 percent of Hochtief that it doesn’t already own at around €2.7 billion. Its goal is to increase its shareholding in Hochtief to just above 50 percent, allowing for full financial consolidation of the company. Under the terms of its offer, that should cost it close to €800 million.