Analysts rally around Hochtief after Qatar stake

Stock watchers divided by timing of 9.1% purchase by sovereign fund

ACS may have to pay EUR130 million more to secure 30% of Hochtief, analysts estimate.
ACS may have to pay EUR130 million more to secure 30% of Hochtief, analysts estimate.

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The announcement by Hochtief that it has welcomed Qatar’s sovereign wealth fund as a shareholder makes sense to some analysts in the midst of the ongoing takeover attempts of the German contractor by Spain’s Actividades de Construccion y Servacios (ACS).

Qatar Holding is to take a 9.1% stake in the builder as the German firm fends off a hostile bid from the Spanish company, which owns just less than 30%. Hochtief announced a 30% capital increase programme after its last annual general meeting earlier this year, a plan that gives investors a number of options to increase their stake under different conditions and has raised the investment level needed by ACS to take a controlling stake.

That the announcement was made in the middle of the capital increase window, rather than at the end of December when it closes, means “the fight has just begun” in the view of some.

“It would probably have been better to present the new shareholder at the end of the offering period,” said Marc Nettelbeck at DZ Bank. “Presenting now could be a good idea as now the market thinks that there might be another agreement with Qatar Holding for it to increase its shareholding.”

He added that a 9% stake would not exactly give protection from a hostile bid and that ACS is likely to resume its takeover attempt.

Nettelbeck estimated that based on Hochtief’s share price increase since the inclusion of Qatar Holding, and the dilution of ACS’s holding by 29.99% down to around 27% , means the Spanish firm will likely have to pay around EUR130 million (US$173.5 million) more to cross the “threshold” 30% ownership.

ACS announced its intention to submit a takeover offer for the complete capital stock of Hochtief in mid-September. If eventually successful, the move would make ACS one of the largest construction companies in the world.

Analysts tracking the company have rallied around Hochtief, which rose more than 6% in three days. Ingbert Faust at Equinet in Frankfurt this morning posted a ‘buy’ rating on the company’s equity, predicting an outperformance of 8.75%. This followed ‘buy’ ratings from Nettelbeck, Tobias Loskemp of Kepler Capital Markets, Gregor Kuglitsch at UBS and Steffan Roehle at Independent Research yesterday.

In March Hochtief signed a $114.8 million joint venture with Bahrain Airport Company (BAC) to provide facility management services at Bahrain International Airport.

The Qatar Holding stake “will make it easier for the company to get work,” according to an analyst in London, who declined to be named.

“A lot of [foreign] companies are in joint ventures with local companies, and they are now close to the Qatari government.”

In relation to the ACS bid, the source added: “Hochtief want to keep the Spaniards out – whether this stake will help them I don’t know.

"They want to dilute ACS’s shareholding, so there’s no coincidence that the company is revealing it now, and get it done before the capital increases closes.”

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