German regulator allows ACS offer for Hochtief

By Helen Wright01 December 2010

Dr Lütkestratkötter, chairman and CEO at Hochtief

Dr Lütkestratkötter, chairman and CEO at Hochtief

German regulator BaFin has approved an offer by Spanish construction group Actividades ACS to gain control of Hochtief, giving the green light to what Hochtief views as a hostile takeover bid.

In a statement, Hochtief - which has fought against the total € 2.7 billion (US$ 3.5 billion) all share offer - said its executive and supervisory boards would now examine the deal on the table and comment in detail in due course, including giving a recommendation to its shareholders on the takeover offer.

Hochtief CEO Herbert Lütkestratkötter said, "We recommend our shareholders not to take a decision before the comment has been published", adding that the company will explain to the shareholders in detail which advantages or disadvantages the ACS offer has.

"There is no reason for hasty decisions, you have got time," Mr Lütkestratkötter told shareholders.

The regulator's approval of the deal is a blow to Hochtief, which says the offer does not add value to other shareholders.

BaFin said in a statement that it had requested ACS to make "considerable improvements" to its offer during the course of the review of the deal.

"For example, it had qualified the use of shares originally planned by ACS (which shares had yet to be procured by ACS by way of securities loans) to be insufficient as a means of ensuring consideration. In accordance with BaFin's long-standing practice, a capital increase resolution was instead required in cases of exchange offers," the regulator explained.

"ACS made all requested improvements and BaFin therefore allowed the application," BaFin concluded.

The offer document had been under review by BaFin since 12 November 2010.

Madrid-based ACS announced in September it aimed to launch a total € 2.76 billion (US$ 3.5 billion) all-share bid for the 70% of Hochtief it didn't own, but added that it 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 all-stock offer proposed trading eight of its own shares for every five of the German builder's.

In order to come up with the funds, ACS plans a share issue to raise capital.

ACS became Hochtief's largest shareholder in 2007 when it acquired a 25% stake for € 1.26 billion. Since then, ACS has gradually increased its stake to just under the key 30% threshold.

Hochtief's resistance to the creeping takeover deal has already been dealt several blows.

In October, the Australian Securities and Investments Committee (ASIC) said it would not require ACS to fully acquire Hochtief subsidiary Leighton, should its hostile bid go ahead.

Hochtief owns a 54.4% stake in Leighton, and it had hoped the requirement for ACS to fully acquire the Australian construction company would make the Spanish contractor's proposed hostile takeover of Hochtief too expensive.

Hochtief referred the matter to Australia's Takeovers Panel, but was knocked back again after the panel agreed with the ASIC decision at the start of November.

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