Spain's building giant to bid for rest of Hochtief

Madrid/Frankfurt: Spanish builder ACS plans to bid for the remaining shares in German construction group Hochtief via a nil-premium all-share deal to diversify into higher-growth markets.

The news brought Hochtief shares down off their early highs, after a newspaper report of a deal triggered early hopes of a windfall for investors holding the outstanding 70 per cent of Hochtief shares.

ACS said it would offer eight new ACS shares for every five Hochtief held in an offer that values both companies at their average share price over the last 3 months. Based on Wednesday's closing share price the 70 per cent stake is worth about 2.75 billion euros (Dh13 billion).

The move would allow ACS to diversify beyond western Europe, where austerity is hitting public works spending.

ACS generated 85 per cent of its sales in 2009 in western Europe and 9 per cent in South America whereas Hochtief made only 20 per cent of its revenues in western Europe as opposed to 43 per cent in North America and 11 per cent in Asia.

Main charm

"Hochtief's main charm is its (Australian subsidiary) Leighton Holdings and this is definitely also appealing to ACS, and other companies for that matter," analyst Heino Ruland of Ruland Research said.

Hochtief shares rose 10 per cent to 61.5 euros after the market opened, but gave up gains after the announcement from ACS to stand up just 1 per cent at 56.87 euros. Shares in ACS were suspended and are due to resume trading from 0945 GMT. In December, Hochtief cancelled an initial public offering, in which it planned to raise up to 1 billion euros after it failed to attract commitments.

ACS agreed in August to sell a 1.7 billion euro stake in Spanish toll road operator Abertis to private equity fund CVC Capital Partners, freeing up the Spanish builder to cut debt and pursue energy investments.

ACS, headed by Florentino Perez — who is better known for hiring expensive players for the Real Madrid football club he runs as a hobby — was thought to have been planning to use the funds to raise its stake of about 13 per cent stake in power group Iberdrola.

Perez frequently says he wants a 20 per cent stake in the energy company.

Analysts say raising its stake in Hochtief may offer an alternative to the company's drive to diversify.

"The transaction makes strategic sense as it would expand ACS's construction business to the whole world and reinforce presence in the US and Polland, generate cost savings, and expand its presence to Australia," an Ahorro Corporacion analyst said.