ACS gets $5 billion Hochtief offer underway

By Matthias Inverardi and Josie Cox

DUESSELDORF/FRANKFURT (BestGrowthStock) – Spain’s ACS (ACS.MC: ) formally launched its 3.8 billion-euro ($5 billion) hostile bid for Hochtief (HOTG.DE: ) on Wednesday, after a 10-week battle of words with Germany’s largest builder.

ACS will offer eight of its own shares for every five of Hochtief’s, a deliberately underwhelming bid that is unchanged from ACS’s initial proposal made in mid-September.

The low-ball offer is expected to see few takers, leaving the Spanish firm free to increase its current 29.9 percent holding in Hochtief above the 30 percent threshold that triggers a mandatory bid under German takeover rules.

Instead of buying the whole company ACS has already said it aims to gradually build up its stake in Hochtief to over 50 percent, which analysts say will then enable it to consolidate Hochtief in its own financial accounts.

“As previously stated, a domination agreement or profit-and loss transfer agreement is not intended,” ACS said in a statement, adding that Hochtief will remain a German-listed company with a substantial free float, headquartered in Essen.

On Monday German markets watchdog BaFin gave the regulatory go-ahead for the bid.

ACS’s offer was worth around 55.14 euros per share on Wednesday, when Hochtief’s shares were trading in the market at over 58 euros, up 2 percent on the day.

ACS has said that the tender period for the offer will end on December 29 and the company expects the whole offer to be completed by February 2011.

“BaFin’s approval of the offer yesterday and now this really makes me wonder whether there are any options still available to Hochtief,” a Frankfurt-based analyst who declined to be named said, adding that he still believed the offer grossly undervalued Hochtief.

Analysts say ACS, which has a market capitalization of around 11.6 billion euros, is chiefly attracted to Hochtief, which has a market capitalization of around 4.4 billion, by its low borrowings and its lucrative 54.5 percent stake in Australian unit Leighton (LEI.AX: ).

In the offer document, ACS, which is headed by Real Madrid soccer club president Florentino Perez, said that it had no plans to sell Leighton.

Hochtief has previously said that an ACS takeover might trigger change-of-control clauses contained in “major loans” to Hochtief and certain contracts awarded to subsidiaries and “… there may consequently be a considerable need for refinancing and indeed new borrowing within the Hochtief Group.”

But ACS said on Wednesday that it did not expect a change of control to lead to “material, enduring and irreparable damage for Hochtief” in that respect.

“The financial consolidation of Hochtief will have no adverse effects on Hochtief’s financial position,” ACS said.

“There will be no actual transfer of assets from Hochtief to ACS, and there are no plans which would result in an increase of Hochtief’s indebtedness,” it added.

Net debt at ACS stood at 9.08 billion euros at the end of September, whereas Hochtief told investors in a results presentation that its own debt was just 447 million euros.

($1=.7639 euros)

(Editing by Greg Mahlich)

ACS gets $5 billion Hochtief offer underway