Four members of Hochtief AG (HOT)’s supervisory board withdrew from seeking re-election as majority investor Actividades de Construccion & Servicios SA pushed through a plan to end the German builder’s seven years of independence.
Supervisory board Chairman Detlev Bremkamp, Hans-Peter Keitel, Heinrich von Pierer, and Wilhelm Simson stepped down as candidates, the company said in a statement today.
Their resignation means the directors avoid a re-election battle they were destined to lose. ACS acquired 43.1 percent of Essen-based Hochtief, giving it an effective majority say in the appointment of board members at the annual shareholder meeting today. Attendance was about 69 percent, Bremkamp said.
“We are today carrying Hochtief’s independence to its grave,” said Marc Tuengler, a representative of shareholder association DSW.
ACS used a “loophole” in German takeover law to gradually build its stake, said Herbert Luetkestratkoetter, who resigned after an address tinged with emotion to those assembled in the hall. Hochtief has had no majority shareholder since German utility RWE AG sold its controlling stake in 2004. ACS today said it expects to reach 50 percent by the end of June.
Luetkestratkoetter did not want to resign and was asked to do so by ACS, which was not interested in a compromise over increasing its candidates, Bremkamp said. The CEO’s address was met with a standing ovation from board members and shareholders alike.
ACS, based in Madrid, had proposed its own candidates for the board on May 8, which would raise the number of its representatives to four from two, while the four current members had said they would run for re-election. ACS’s proposal was “not balanced” and ACS was “not interested in a compromise,” Bremkamp said.
“ACS acted hostile from the beginning until today,” said Tuengler. “That isn’t proper behavior. Come out of your hiding and tell us your plans for Hochtief,” Tuengler asked the representatives of ACS on Hochtief’s supervisory board.
In addition to Luetkestratkoetter, Hochtief’s Peter Noe, concessions head, and Burkhard Lohr, chief financial officer, are also leaving, meaning Hochtief loses three out of five members of its management board. Board member Frank Stieler will take over as CEO.
Argument Is Over
“This meeting is not the place to continue an argument that is already over,” Peter Erbacher, a lawyer at Linklaters in Frankfurt representing ACS, said. Erbacher said he disagreed with Bremkamp’s description of ACS’s behaviour, without providing details.
Hochtief today said pretax profit will fall to “about half” the level of 2010, when the builder earned 756.6 million euros ($1.1 billion). Hochtief had to scrap its forecast for 2011 after its Australian unit Leighton Holdings Ltd. (LEI) reduced its expectations for the current fiscal year, causing Hochtief shares to fall the most in two years on April 11.
“This may be the worst day in Hochtief’s history,” said Heidi Demke of Germany’s SdK association of shareholders. “Hochtief is heading for a new age, an uncertain one.” Demke said she fears ACS may cut jobs and break up Hochtief.
Over the last five years, Hochtief has earned an average of almost three-quarters of its pretax profit from the Asia-Pacific region, where Leighton is the main contributor. Demke said Hochtief had become too dependent on Leighton over the years and should have judged the current situation at its Australian unit better.
Hochtief fell 0.8 percent to 62.03 euros at 2:10 p.m. in Frankfurt trading.
“There is only one reason this is happening today: the share price was too low,” DSW’s Tuengler said.
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