ACS Takeover Of Leighton Unlikely; Strategy May Change -Analysts
September 16 2010 - 8:05PM
Dow Jones News
A proposed takeover of Leighton Holdings Ltd.'s (LEI.AU) German
parent Hochtief AG (HOT.XE) by Spain's Actividades de Construccion
y Servicios S.A. (ACS.MC) isn't likely to trigger a full takeover
of the Australian construction company but could mean a change of
strategy, analysts said Friday.
ADS on Thursday made an all-stock offer valued at about EUR2.73
billion for the 70% of Hochtief it doesn't already own. Hochtief
owns 54% of Leighton, which only this week announced the impending
retirement of long-serving Chief Executive Wal King.
Hochtief said it hasn't received an offer yet.
UBS analyst John Freedman said that while ACS could sell the
Leighton stake, a more likely scenario would be to reduce
Hochtief's corporate costs and sell some non-construction European
assets. "A block trade out of Leighton seem unlikely, in our view,
as is an outright bid for Leighton," Freedman said.
A bid is unlikely because ACS has used its own stock for the
Hochtief offer, ACS is a construction conglomerate with a history
of holding controlling stakes in other contractors and Leighton
offers it a high growth exposure to emerging markets, Freedman
said.
Deutsche Bank analyst Craig Wong-Pan agrees that ACS is likely
to retain its stake in Leighton but said the transaction is a
slight negative to Leighton due to potential changes to its
management and strategic direction.
Hochtief currently has four seats at Leighton's board of 12
directors and ACS may seek a greater number of seats but is
unlikely to make any executive changes, Wong-Pan said.
"ACS does not have any exposure to contract mining and has
minimal exposure to the resources sector," he said.
"Therefore, ACS could seek to limit Leighton's exposure to
contract mining and expanding into the Asian resources
markets."
Leighton shares last traded at A$33.57.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
Ross.Kelly@dowjones.com