ACS makes all-share bid for Hochtief

By Chris Sleight20 September 2010

ACS has announced an offer to acquire a controlling stake in Germany's Hochtief. The Spanish group says it wants to build a holding of, "Just over 50%". The board of Hochtief is yet to respond to the offer.

Commenting on the rationale behind the offer, ACS chairman Florentino Pérez said, "The envisaged shareholding level is beneficial for both ACS and Hochtief. Together we will be the no. 1 infrastructure group in the Western world, with a strong presence on each continent and a unique foothold in the emerging markets. Both companies will not only grant each other access to new geographic markets, but will also enjoy benefits of scale, improving their competitive position."

The company said it was aiming for a majority stake in Hochtief to allow for, "Full financial consolidation over time." However, it said it wanted Hochtief and its regional subsidiaries such as Turner and Flatiron in the US and Leighton in Australia and Asia to maintain their existing brands and identities.

ACS bought a 25,08% stake in Hochtief in April 2007 for € 1,26 billion in cash from an institutional investor. At the start of 2009 it increased its holding to 29.98%, keeping it just below the 30% level that would oblige it to launch a full takeover offer.

Under the terms of the new tender, it is offering eight ACS shares for every five Hochtief shares. This values the German group at € 4,04 billion.

However, Hochtief's stock has risen since the offer was announced, and the 8:5 offer ratio now looks unfavourable for the German company's share holders. Based on the two companies' share prices, the ACS offer is currently worth about 5% less than the cash value of Hochtief shares.

Mega company

Hochtief was ranked third in Construction Europe magazine's 2010 CE-100 league table of Europe's largest contractors, while ACS took fourth position. A full merger of the two would see the new company overtake Bouygues and Vinci to be the region's largest contractor.

On a global scale, Hochtief was placed eighth and ACS tenth in International Construction magazine's league table of the world's largest construction companies. A merger of the two companies would see it rise to third place in the global league table, based on 2009 revenues, behind China Railway Construction Group and China Railway Group.

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