Spain's ACS has turned up the heat on bid target Hochtief by sweetening an all-share offer to value its German construction rival at around 4.9 billion euros ($6.5 billion).

The Spanish group, stalking Hochtief since September, said that it had improved its bid to nine ACS for every five Hochtief shares from its previous eight-for-five offer, adding it was confident the higher bid would succeed.

ACS's amended offer was unexpected. It values Hochtief at 63.8 euros per share, a two per cent discount to the market price, said a report in our sister publication, the Gulf Daily News.

ACS had been widely expected to let its initial offer run its course.

In another sign that ACS wants to wrap up the take-over quickly, sources said that the chief executive officer of Qatar Holding, the Qatari investment vehicle which last week snapped up a 9.1 per cent stake in Hochtief, would meet ACS.

If ACS can get its holding above 30 per cent it can gain control of Hochtief by taking its stake up to 50 per cent, without having to buy out all the German group's shareholders.

Analysts said the move showed ACS was serious about the offer and would probably not raise its bid again, although one of Hochtief's top 12 investors dismissed the new bid as too low.

"I don't think the game is over yet. ACS still need to get to 30 per cent before they can start freely buying Hochtief shares in the market. The current offer is at a discount to the market price of Hochtief," said Kathleen Dewandeleer, a fund manager at Scottish Widows Investment Partnership, which has a 0.54 per cent holding in Hochtief. "ACS is stretched already so a higher share offering will certainly not be to their benefit. I would reject the current offer."

The German company earlier urged its investors to reject ACS's initial low-ball bid on financial and strategic grounds.

It opened the door to talks with ACS at the weekend, raising expectations that a three-month war of words with its largest shareholder would enter a more constructive phase. It said yesterday that discussions would begin shortly.

Spain's largest construction company, headed by Real Madrid soccer club president Florentino Perez, made a formal take-over bid - initially worth around 4.3bn euros - for Germany's biggest builder two weeks ago.

It first expressed an interest in increasing its near 30 per cent stake in September. Hochtief chief executive Herbert Luetkestratkoetter has explored options to fend off the bid, including seeking a white knight.

He risked a shareholder backlash by rushing in the capital raising deal with Qatar, selling a 9.1 per cent stake at 57.114 euros per share, diluting ACS's holding. The move added muscle to Hochtief's defence by making it harder for ACS to get above the 30 per cent threshold.

But it also angered leading ACS and Hochtief investor Southeastern Asset Management, which says Hochtief shares are worth 95 euros each.

Luetkestratkoetter said Hochtief had talked with Southeastern since Qatar's move, but did not envisage acting on the US-based investor's demand that he resign.

As a result of the capital hike, Southeastern's stake has been cut to 4.84 per cent from just above 5. The investor holds 5.06 per cent of ACS. – TradeArabia News Service