Regulator probes Southeastern’s role in Hochtief takeover

The German financial watchdog is looking into the role Southeastern Asset Management, a shareholder in both ACS and Hochtief, has played in the ongoing takeover process for the German company. ACS denies having acted in concert with Southeastern.

US fund manager Southeastern Asset Management is being investigated by German regulator BaFin regarding the role it played on the ongoing takeover process of Hochtief by Spanish infrastructure group ACS.

Southeastern – a shareholder in both ACS and Hochtief – played a decisive role in helping ACS cross a key shareholding milestone in Hochtief that will now allow it to pursue majority ownership of the German firm on the open market.

The fund manager announced it would tender roughly two million shares in Hochtief to ACS, about half of its 5 percent shareholding in the company, after it claimed to have lost confidence in the firm’s management. This followed management’s decision to sell a 9.1 percent stake in Hochtief to an investment vehicle of the Qatar government at a price Southeastern termed a “give away”.

BaFin is now looking into whether Southeastern’s offer was compliant with German law. A spokesman for Southeastern confirmed that the fund manager had been asked a number of questions by the German regulator but denied that it had been accused of any misconduct. An ACS spokeswoman said ACS had conformed to German law and denied any suggestion that it had acted in concert with Southeastern regarding its tender offer.

Talk of possible wrongdoing emerged after a German newspaper reported that Hochtief had asked BaFin to investigate the possibility of ACS and Southeastern having acted in concert during the takeover process. But a source close to the process noted that BaFin contacted Southeastern before the interview was published.

Infrastructure Investor could not reach BaFin for comment at press time but a spokeswoman from the watchdog told Reuters yesterday that “we are looking into clues relating to Southeastern Asset Management”. She added that the takeover process was unlikely to be declared void “in its entirety” as a result of the regulator’s investigation, but did not say when the investigation would conclude.

ACS announced Tuesday that it had amassed a 30.34 percent stake in Hochtief, crossing the 30 percent threshold that, under German law, will allow it to pursue a controlling stake in Hochtief on the open market. In all, 3.09 percent of Hochtief’s shareholders had sold their stakes to ACS by December 29, 2010. ACS is now extending its takeover offer, valuing Hochtief at €4.9 billion, until January 18.

Once it owns more than 50 percent of Hochtief, ACS can consolidate the company in its books, helping it to cut debt and use the German firm’s international presence to offset its exposure to the troubled Spanish market, from which it derives most of its sales.