ACS explores legal route to win Hochtief bid

By Andres Gonzalez and Josie Cox

MADRID/FRANKFURT (BestGrowthStock) – Spanish builder ACS (ACS.MC: ) is considering all options including legal action to keep its 4 billion euro ($5.3 billion) bid for German rival Hochtief (HOTG.DE: ) on track.

“Our offer has not changed,” a spokesman for ACS told Reuters on Tuesday. Asked about a newspaper report that said the company was considering legal action to block the sale of shares to the Gulf state of Qatar, the spokesman said: “All options are open.”

Hochtief tried to throw a spanner in the works of ACS’s hostile all-share bid on Monday by issuing 7 million new shares at a discount to the Gulf state of Qatar. The 400 million euro ($530 million) capital increase will dilute ACS’s existing stake to 27.25 percent from just under 30 percent.

Hochtief’s action could be seen as a purely defensive move against ACS’s deliberately low-ball eight-for-five all share bid and not therefore in the best interests of shareholders, some analysts say, although the move does increase Hochtief’s chances of escape.

Earlier Spanish newspaper Expansion said ACS’s legal team was examining Hochtief’s planned share issue to see whether to take legal measures against it.

ACS, headed by Real Madrid soccer club president Florentino Perez, could argue that the deal works against shareholder interests.

“ACS is likely to oppose the capital increase under the argument that Hochtief, with net debt at 0.3 times estimated 2010 core earnings, does not need one,” said brokerage BPI in a note.

With or without the capital increase, ACS’s deliberately low offer — valuing Hochtief shares at 57.25 euros — may not be enough to take its stake past 30 percent and meet regulatory conditions allowing it to make further stake increases. Its offer is worth 12 percent less than the Hochtief share price following the Qatar deal.

“The capital increase worsens ACS’s position and makes it necessary for ACS to gain control of more shares in order to reach its plan of raising its stake in Hochtief to beyond 30 percent,” Ingbert Faust, Research analyst at Equinet said.

ACS shares were up 0.1 percent at 35.8 euros at 1623 GMT to value its bid at just over 57.5 euros, while Hochtief shares were up 3.4 percent at 64.81, having earlier hit a 29-month high of 67.17 euros.

However, other analysts said they did not see the dilution of ACS’s stake causing a problem for the bidder.

“We do not see that this is going to be a stumbling block to ACS getting enough shares to get over 30 percent of Hochtief,” Spanish brokerage Renta4 said in a note.

Under German takeover rules, should ACS fail to acquire over 30 percent of Hochtief by December 29, any further attempt to win control would require it to bid at a price based on the average Hochtief share price for the preceding three months — which is likely to be higher than the existing bid price.

“The battle for Hochtief is not over. For one, should ACS’s shareholding not exceed 30 percent by the end of the tender period, it would be required to make a mandatory offer if it increases its stake above 30 percent in the future,” Craig Abbott, research analyst at Cheuvreux, said.

(Additional reporting by Jonathan Gleave in London; writing by Alexander Smith; editing by Dan Lalor and Andrew Callus)

ACS explores legal route to win Hochtief bid