Hochtief urges shareholders to reject ACS offer

By Helen Wright15 December 2010

Dr Lütkestratkötter, chairman and CEO at Hochtief

Dr Lütkestratkötter, chairman and CEO at Hochtief

Hochtief has recommended that its shareholders reject a takeover offer by Spanish construction group Actividades de Construcción y Servicios (ACS), claiming that the bid was "financially inadequate" and "offers no competitive advantages".

Hochtief shareholders now have until 18 January to decide on the offer.

The board's rejection recommendation comes as no surprise - Hochtief has consistently fought against the total € 2,7 billion (US$ 3,5 billion) all-share offer since it was announced in September, viewing it as a hostile takeover bid.

Madrid-based ACS became Hochtief's largest shareholder in 2007 when it acquired a 25% stake for € 1,26 billion. The company has gradually increased its stake to just under the key 30% threshold since then.

And in September, ACS launched the all-share offer for the 70% of Hochtief it didn't already own, adding that it actually aimed only to increase its stake to slightly above 50% so that it could consolidate Hochtief on its balance sheet, but still leave a substantial free float.

The offer was given the green light by German regulator BaFin at the start of December, and if Hochtief shareholders approve the deal, it could close by early February 2011.

But in its recommendation to shareholders, Hochtief said its board and its banking advisors, Credit Suisse and Deutsche Bank, "do not deem the offer consideration adequate from a financial perspective".

"On the basis of the intentions and objectives presented by ACS in the offer document, the executive board and the supervisory board fail to comprehend in which way the exchange offer and a possible consolidation of Hochtief by ACS could also improve Hochtief's competitive position," the company said.

Hochtief added that it considered the strategic positioning of the independent Hochtief group and its prospects for the future promising.

"As of 2011, Hochtief expects profit before taxes of approximately € 1 billion. For 2013, profit before taxes of more than € 1 billion and consolidated net profit of roughly € 450 million are expected," the company said.

The board's recommendation to reject the offer comes after the Qatar government put an obstacle in the way of ACS's approach when it bought a 9,1% stake in Hochtief on 1 December.

State-owned investment vehicle Qatar Holding LLC bought around 1 million shares which were newly issued directly to it by Hochtief.

The deal gave the German contractor a capital injection of € 400 million, but the new share issuance also diluted ACS's existing shareholding in Hochtief - making the takeover deal more expensive.

In order to achieve a 50% holding in Hochtief, ACS must now acquire a further 17,5 million Hochtief shares instead of the 14 million required prior to the share issue to Qatar holding.

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