German builder Hochtief digs in against ACS bid

By Maria Sheahan

FRANKFURT (BestGrowthStock) – Hochtief dismissed Spanish builder ACS’s sweetened all-share bid as inadequate on Friday and urged shareholders to reject it.

Germanys biggest construction group is battling to remain independent after ACS, which has been stalking it since September, turned up the heat by improving its offer to about 4.9 billion euros ($6.5 billion) on Wednesday.

“The implicit value of the increased offer consideration does not reflect the fundamental value of Hochtief,” the German construction group said in a statement on Friday.

The new offer — under which investors would get nine rather than eight ACS shares for every five Hochtief shares — values the German builder at 63.26 euros per share, a 2.3 percent discount to the market price.

ACS had earlier tried a new tack to lure hesitant Hochtief shareholders to part with their shares, saying it would wait until its bid finishes before paying its interim dividend. That will ensure that shareholders who tender their stock to ACS can qualify for the cash payment.

Hochtief shares were 1.1 percent lower at 64.54 euros by 1504 GMT. ACS was down 1.35 percent.

Hochtief said the new offer by ACS was still below the average of analysts’ price targets, which it said was 72.80 euros as of Thursday.

An ACS spokeswoman said the company did not want to comment on Hochtief’s rejection of the bid.

Hochtief Chief Executive Herbert Luetkestratkoetter has explored a number of options to fend off ACS’s bid.

A few days after the takeover was formally launched this month, he rushed in a capital increase that gave Qatar a 9.1 percent stake in the company and diluted ACS’s holding, which had stood at close to 30 percent.

Luetkestratkoetter’s move drew the wrath of one of Hochtief’s biggest shareholders, Southeastern Asset Management, who complained that the new shares were sold to Qatar at a price of 57.114 euros each, which the investor said was below value.

Southeastern, which also has a 6.5 percent stake in the Spanish construction company, has since brought it within a whisker of the 30 percent stake needed to take control of Hochtief by handing some 2 million shares, around 2.6 percent of the company, to the Spanish predator.

“As ACS needs around 2.1 million shares to exceed the 30 percent threshold … ACS is highly likely to be able to overcome this major hurdle, even if no other shareholders take up the exchange offer,” DZ Bank analyst Marc Nettelbeck said. He sees the fair value of Hochtief shares at 77 euros.

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.

Like its home country, ACS is saddled with debt, with 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.

(Additional reporting by Matthias Inverardi; editing by Alexander Smith)

German builder Hochtief digs in against ACS bid