Hostile takeover
October 13, 2010
Threatened by a possible hostile takeover, German construction giant Hochtief has enlisted help from the political establishment. The Spanish construction company ACS – which is already the company's largest single shareholder with a nearly 30 percent stake – announced its takeover plans last month.
SPD party leader Sigmar Gabriel will visit Hochtief's headquarters in Essen on Thursday to meet with its works council and gather information about the situation. ACS is set to submit its offer to Germany's financial regulator, BaFin, for review on the same day.
A Hochtief spokesman said until the ACS offer has cleared BaFin, it's too early to describe it as hostile or otherwise. Nevertheless, the company is working on plans to combat the scenario.
“We're examining all options,” he told Deutsche Welle.
If BaFin approves the offer, it could be brought to shareholders by the end of December.
Rapid international expansion
In recent years, ACS has been rapidly expanding outside of the Spanish market. Phoebe Kebbel of Frankfurt-based Hering Schuppener, a consultancy representing the company in Germany, told Deutsche Welle that “for quite some time ACS has been in the process of becoming significantly more international.”
In 2009, 25 percent of ACS' turnover was generated outside of Spain, as compared to 40 percent today. Regardless of the outcome of its plans for Hochtief, ACS intends to source 50 percent of its turnover from outside of Spain by 2012, including its current 30 percent stake in Hochtief.
“Internationalization is certainly a significant strategic focus for ACS, but one way or another the company is headed in that direction,” Kebbel said.
Kebbel said wouldn't describe ACS' intentions as hostile because Hochtief would remain listed and headquartered in Germany, although ACS seeks a stake of more than 50 percent to financially consolidate the companies over time. Hochtief would be able to maintain a significant free float, and the two companies would become a leading market force in the Western world.
“The friendly intentions here are really justifiable,” she said.
Spanish market weak
According to Marc Gabriel, an analyst with Bankhaus Lampe, ACS has its sights set on Hochtief's international business, which accounts for 90 percent of its total turnover. The Spanish economy has particularly lagged in the real estate sector, eating into ACS' domestic business.
“The market there is still bordering on a crisis, and that means the great profits they've made in recent years are less,” he told Deutsche Welle.
Gabriel said Hochtief has a number of options at its disposal to thwart a hostile bid. The most drastic measure would be to transfer ownership of Hochtief to its Australian subsidiary Leighton Holdings.
Hochtief may also consider a capital increase. Selling more shares would water down ACS' current stake in Hochtief, forcing the heavily indebted company to buy many more shares to gain control of the German group, Gabriel said.
Gabriel added that Hochtief's executives should view the takeover bid as hostile because instead of approaching the German firm with the offer of a negotiation, ACS kept its plans secret until they were made public through an information leak, he said.
Hochtief has 66,000 employees worldwide, including 11,000 in Germany. A takeover by ACS would create one of the world's largest construction companies.
Author: Gerhard Schneibel
Editor: Sam Edmonds