German contractor Hochtief A.G., the Essen-based firm now ranked as the world’s largest in revenue outside its home country, is considering a Sept. 16 buyout offer by Madrid-based construction giant Grupo ACS. The Spanish contractor, which is Hochtief’s largest shareholder with a nearly a 30% stake, has offered $72.70 per share for the rest, valued at about $3.5 billion (€2.7b).
Set at a level below Hochtief’s previous day’s closing price, the bid is “incredibly optimistic and very low,” says Olivia Peters, an equities analyst at MF Global, London. “Maybe they know something we don’t. They’ve had two members on the board. ” Marcelino Fernandes Verdes, president of the ACS construction division, and Angel Garcia Altozano, an ACS corporate general manager, are among those on the German firm’s board.
ACS first acquired 25.1% of Hochtief for $1.65 billion in 2007 as a route to growing internationally. It raised its holding last year. Nearly two-thirds of Hochtief’s shares are on the market.
Hochtief owns two key U.S. contractors, Turner Construction Co., New York City and Flatiron Construction Corp., Longmont, Colo., In the last several years, ACS, which also owns Spanish contractor Dragados, has acquired U.S. contractors Schiavone Construction, John Picone and Pulice.
The Spanish firm also has a U.S. presence through its concessions unit Iridium Concessiones de Infraestructuras S.A. Iridium has interests in privatized highways. Hochtief’s concessions business is spread in various world regions, including Canada, but has yet to take hold in the U.S.
Peters does not think the U.S. is ACS’s “target market.” She contends that the Spanish firm is primarily interested in increasing its Asian presence through Hochtief’s Australian subsidiary Leighton Group, St Leonard’s, New South Wales. It is a major contractor in that country, particularly in infrastructure, minerals and concessions sectors, and also is active in East Asia, with a growing presence as well in India and the Middle East.
ACS reported sales last year of $20.4 billion, 2.2% up on 2008. The firm ranks 18th on ENR’s list of the Top 225 International Contractors, which measures revenue not from a company’s home country.
ACS earnings before interest, taxes, depreciation and amortization (EBITDA) grew 5.5% in 2009 to $2 billion. Hochtief reported EBITDA of $997 million on work valued at $26.9 billion.