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Hochtief bosses urged to quit over stake move

Frankfurt, December 10, 2010

A top investor in both bid target Hochtief and its Spanish predator ACS 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 per cent 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 had revealed on Monday a seven million share issue to Qatar for 400m euros ($532 million), a move that will dilute ACS' holding of nearly 30 per cent to 27.25 per cent.

The sale has made ACS' attempt to win control of Hochtief tougher. It has also boosted the price of Hochtief shares and made it at least 200m euros more costly for ACS to reach its target of 50pc of Hochtief.

ACS formally launched a hostile bid for Hochtief last week after a 10-week battle of words with Germany's largest builder.

Southeastern, which holds stakes of just over 5pc in both ACS and Hochtief, said in a letter to Hochtief that the 57.114 euros per share price at which Hochtief had sold stock to Qatar was "dramatically below the intrinsic value of Hochtief".

It also questioned why Hochtief needed additional capital given its financial strength. In the letter, Southeastern valued the German company at 95 euros per share.

The rise in Hochtief's share price has made ACS' offer look much less attractive, but analysts in Madrid said it would not scare ACS off.

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 30pc 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 30pc threshold."

Southeastern also called on Hochtief to retire 3.44m treasury shares "to minimise the damage done to shareholders by their inexplicable decision to give away 9.1pc 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.




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