ACS closes in on Hochtief with investor pledge

By Chris Vellacott

LONDON (BestGrowthStock) – A major investor in both bid target Hochtief

Southeastern Asset Management’s move on Thursday to hand some 2 million shares, around 2.6 percent of Hochtief, to ACS in exchange for the Spanish company’s own stock could prove decisive in a three-month battle between Hochtief and ACS.

Southeastern, which also has a 6.5 percent stake in Spanish builder ACS, said it took the decision after losing confidence in the company’s management.

Hochtief has so far rejected ACS’s all-share bid, which values the German company at nearly 5 billion euros ($6.6 billion), but chief executive Herbert Luetkestratkoetter told journalists on Wednesday he would discuss the offer soon.

Luetkestratkoetter said talks with ACS would cover issues such as the continued stock market listing of Hochtief shares and the location of company headquarters.

ACS already owns just over 27 percent of Hochtief and is looking to raise this above 30 percent with an all-share offer. Now, with the Southeastern shares it is all but there.

If ACS gets above 30 percent, German takeover rules then allow it to buy shares in the market. This will enable it to gain control over its German rival by increasing its holding to 50 percent, without having to buy the whole company.

ACS improved its all-share offer by one share to nine ACS for every five Hochtief shares on Wednesday in an effort to swing shareholders in its favor ahead of a December 29 bid deadline.

“ACS’s improved offer combined with our disappointment in the recent actions of Hochtief management, have led Southeastern to the decision to tender roughly 2 million shares at the revised offer price,” Scott Cobb, Principal and Head of Europe at Southeastern Asset Management, said in a statement.

Southeastern was unhappy about Hochtief’s decision to sell a 9.1 percent stake to the government of Qatar at a discount — a move widely seen as an attempt to thwart ACS’ bid.

Cobb denied that Southeastern was involved in any prior equity swap arrangement with ACS.

“There’s absolutely no agreement, no collusion (with any shareholders). We are not counterparty to anything. This decision is purely a function of our investment process,” he said.

Cobb said ACS’s increased offer valued Hochtief at 91.80 euros a share, based on its own assumptions that ACS shares were worth 51 euros each. This represented a price “very close” to the 95 euros Southeastern believes Hochtief is worth.

Hochtief said it noted Southeastern’s statement and advised its shareholders to hold off making any decision on tendering their shares until it made a recommendation.

The German group said ACS’s revised offer was still “far below” Hochtief’s market value and also less than the average analyst price target.

Like its home country of Spain, ACS is saddled with debt, sitting on more than 9 billion euros of borrowings as of the end of September.

Owning more than 50 percent of Hochtief, which has one of the lowest gearing ratios in the infrastructure sector, would allow ACS to consolidate the German builder on its balance sheet, offering some breathing space at a time of deep economic uncertainty at home.

(Reporting by Chris Vellacott, Cecilia Valente and Greg Roumeliotis, Writing by Alexander Smith; Editing by Andrew Callus)

ACS closes in on Hochtief with investor pledge