Cimic boss to run Spanish construction empire

A $1.5 billion takeover bid instigated by Cimic’s biggest shareholder, Hochtief (which is controlled by ACS), has led to the German construction group securing 87.8 per cent of the Australian company, up from 78.58 per cent before the hostile bid was launched in late February. But part of this increase has been obtained by Hochtief buying shares on market rather than acceptances into the offer.

Under Australian takeover laws, Hochtief needs to get 95.92 per cent of Cimic by the bid’s April 11 closing date to be able to immediately compulsorily acquire the rest of the construction group.

If Hochtief gets more than 90 per cent of Cimic but not as much as 95.92 per cent, it can still try to compulsorily acquire the remaining shares, but it will be a longer process.

Hochtief will have to get its own independent expert’s report stating whether the offer represents fair value for the stock, and also send shareholders an objection form within six months of takeover closing. Hochtief also has the option of extending the takeover’s closing date beyond April 11.

The takeover bid has been recommended by Cimic’s two independent directors but an independent report from Grant Thornton commissioned by the directors said the offer represented a lower premium for control than other recent acquisitions in the mining and engineering sector.

One CIMIC shareholder who started buying shares in the company in the early 1990s (when it was known as Leighton Holdings) said the takeover was “completely opportunistic” and that he believed the company was worth $30 per share.

The investor said that while he had sold two-thirds of his holdings on market since the $22-per-share cash bid was announced because it was held in a self-managed superannuation fund, he was undecided about whether to sell the remaining shares.

Morningstar analysts said in late March that Hochtief’s takeover bid had a “50-50” change of success. The research group estimates the fair value of Cimic’s stock is $27.75 per share.

While Hochtief could further creep up Cimic’s register if the takeover bid fails, continuing to buy shares on market, the company appears to be “on the verge of a turnaround” as it continues to win billions of dollars of new projects, Morningstar said.

Separately, Cimic has been distancing itself from the management of Ventia, the services group that listed in November. Cimic owns almost 33 per cent of Ventia and has the rights to nominate two directors to its board. But Cimic’s fully owned subsidiary, UGL, competes with Ventia.

Cimic said last week it would remove its nominated directors from Ventia’s board and would abstain from any involvement in appointing future directors or the services company’s CEO.

The construction group will now be able to account for its investment in Ventia as a financial asset, and will make an undisclosed, non-cash, one-off gain, Cimic said.