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ACS may challenge Hochtief Qatar defence -analysts

Hochtief announced it was issuing 7 million new shares at a discount to Qatar Holding for $530 million.

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December 7, 2010 2:21 by



Spanish builder ACS is more likely to take legal action to defend its plan to take control of German peer Hochtief than improve its low-ball offer, analysts and press reports said on Tuesday.

Hochtief announced on Monday it was issuing 7 million new shares at a discount to Qatar Holding for 400 million euros ($530 million), diluting ACS’s stake to 27.25 percent from just under 30 percent.

The share issue could be seen as a move purely to defend the company from ACS’s all-share bid and not in the best interests of Hochtief shareholders, brokerage BPI said, adding other investors not allowed to take part in the share issue might also object to having their stakes diluted.

“ACS is likely to oppose the capital increase under the argument that Hochtief, with net debt at 0.3 times estimated 2010 core earnings, does not need one,” BPI said, noting ACS was committed to not increasing the cost of the bid to shareholders.

“Subsequently, we see it unlikely that ACS might raise the terms of its Hochtief bid,” the broker said.

With or without the capital increase, ACS’s offer of eight of its own shares for every five of Hochtief’s — valuing Hochtief shares at 57.58 euros — may not be enough to take its stake past 30 percent and meet regulatory conditions allowing further stake increases.

ACS shares were up 0.2 percent at 35.92 euros at 1105 GMT to value its bid at about 57.5 euros, while Hochtief shares were up 7.2 percent to a 29-month high at 67.17 euros.

Newspaper Expansion said in an unsourced report that ACS’s legal team was examining Hochtief’s planned share issue to see whether to take legal measures against it.

Other analysts said they did not see the dilution of ACS’s stake causing a problem for the bidder.

“We do not see that this is going to be a stumbling block to ACS getting enough shares to get over 30 percent of Hochtief,” Spanish brokerage Renta4 said in a note.

(Reporting by Jonathan Gleave in London; Editing by Alexander Smith and Dan Lalor)



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