Bilfinger SE, Germany’s second-biggest construction company, will consider bidding for the services units of larger competitor Hochtief AG as Chief Executive Officer Roland Koch seeks to fuel growth.
As long as the units didn’t jeopardize existing profit-margin goals, purchasing them could provide Bilfinger with access to new customers, Koch told reporters at a press conference at Bilfinger’s Mannheim headquarters.
“We don’t want to buy them at any cost,” Koch said. “But if we decide we do want them, then we will consider any invitation to bid carefully.”
Bilfinger has 850 million euros ($1.1 billion) available for acquisitions, and is seeking to lift earnings before interest, taxes and amortization to about 6 percent of sales in 2016. The 133-year-old company is targeting output of at least 11 billion euros by that year. Hochtief said Feb. 28 it may sell facility- and energy-management, project and real-estate units, as it seeks to focus on higher margin divisions.
Acquisitions are a key tenet of Koch’s plan to turn Bilfinger from a construction company to a services provider with net income of about 400 million euros in 2016. Part of the plan is to reduce exposure to higher-risk, lower-margin construction projects.
“Hochtief has customers like Mercedes and Siemens in the services area, but the margins in their facility management are well below those at Bilfinger’s power services unit,” Bielefeld, Germany-based Bankhaus Lampe analyst Marc Gabriel, who recommends buying Bilfinger shares, said by telephone. “I don’t think they’re that attractive to Bilfinger.”
Bilfinger is predicting an increase in 2013 profit helped by a savings program and rising demand for engineering work and services in the power industry.
Koch earned 2.3 million euros in his first full year in charge. The former prime minister of the state of Hesse earned a basic salary of 768,000 euros, while his total pay rose 42 percent from 2011. Koch became CEO on July 1, 2011. Born in Frankfurt in 1958, he served as Hesse’s prime minister for 11 years as a member of Angela Merkel’s Christian Democratic Union. Frankfurt is the largest city in the federal state.
Bilfinger’s shares gained 11 percent under Koch’s leadership in 2012 and they have risen 11 percent this year, valuing it at 3.7 billion euros. Essen, Germany-based Hochtief lost 1.7 percent last year. The stock traded 0.3 percent lower to 81.35 euros as of 2:54 p.m. local time.