Investor wants bosses out over Hochtief Qatar move

FRANKFURT/MADRID (Reuters) - A top investor in both bid target Hochtief HOTG.DE and its Spanish predator ACS ACS.MC has called for the resignation of the German builder's bosses who sold a stake in the company to Qatar.

Southeastern Asset Management condemned both the price of Hochtief’s 9.1 percent stake sale to the Gulf state and the way it was carried out.

“It is our fiduciary duty to request that those members of the Supervisory Board and the Executive Board who took this value-destructive decision should resign from the company immediately,” the asset management group said.

Hochtief on Monday announced a 7 million share issue to Qatar for 400 million euros ($532 million), a move that will dilute ACS’s holding of nearly 30 percent to 27.25 percent.

The sale made ACS’s attempt to win control of Hochtief tougher by boosting the price of Hochtief shares and making it at least 200 million euros more costly for ACS to reach its target of a 50 percent shareholding.

ACS formally launched a hostile bid for Hochtief last week after a 10-week battle of words.

Hochtief again rejected the bid on Thursday.

“The offer of ACS is much too low, nobody should accept it,” Hochtief board member Manfred Wennemer told Reuters.

Southeastern, which holds stakes of just over 5 percent in both ACS and Hochtief, said in a letter to Hochtief that the 57.114 euros per share paid by Qatar was “dramatically below the intrinsic value of Hochtief.”

It also questioned why Hochtief needed additional capital given its financial strength.

In the letter, seen by Reuters, Southeastern valued the German company at 95 euros per share.

However, Scottish Widows Investment Partnership (SWIP) -- a top-12 institutional investor in Hochtief with 0.54 percent -- applauded the Qatar deal.

“Qatar coming into the company in this way makes things quite interesting...on two different fronts, from the perspective of the takeover bid and the potential to gain many more Middle Eastern contracts, particularly after the World Cup announcement and the demand for air-conditioned football stadia in Qatar,” Kathleen Dewandeleer, a SWIP fund manager said.

Hochtief shares were trading 2.27 percent higher at 64.84 euros at 1537 GMT.


The rise in Hochtief’s share price has made ACS’s offer -- valued at 57.9 euros at 1125 GMT -- look much less attractive, but analysts in Madrid said it would not scare off the Spanish company.

The bid is pitched deliberately low because ACS does not want to pay out for the whole of Hochtief’s share capital. Its aim is to cross the 30 percent threshold with its low-ball bid, after which German takeover rules allow it to buy more stock in the market.

“I don’t think this will stop ACS from reaching its objective,” one Madrid-based analyst said.

“If ACS barks that means they have been hit at the right spot,” said a Frankfurt-based fund manager who is invested in Hochtief. “But winning Qatar as a shareholder will not prevent the deal going through, especially as ACS allegedly has cash settled options to get above the 30 percent threshold.”

Southeastern also called on Hochtief to retire 3.44 million treasury shares “to minimize the damage done to shareholders by their inexplicable decision to give away 9.1 percent of our company at such a steep discount to value.”

Earlier, ACS declined to comment on a Financial Times Deutschland report that Qatar might raise its stake in Hochtief.

“I already expected that Qatar may actually hike its stake above the 9.1 percent. I’m not sure how high Qatar would go, but I could imagine that 15 percent may be a realistic figure,” NordLB analyst Heino Hammann said.

Analysts and bankers are split on Qatar’s motivation for taking the stake, with some saying it could be a straight financial investment rather than the strategic soccer World Cup-related move as described by Hochtief.

Additional reporting by Matthias Inverardi, Arno Schuetze and Sinead Cruise; Writing by Alexander Smith and Tracy Rucinski; editing by Andrew Callus and Jane Merriman