While nothing can ever be ruled out, rumours about a takeover of Australian construction giant Leighton Holdings do not appear to have a great deal of immediate substance.
Along with confirmation that its troubled desalination plant project in Victoria is now producing drinking water – a relief, after several write-downs on the project – rumours of a potential takeover are said to be partially behind a sudden 8.4 per cent jump in Leighton’s share price last Friday.
Apparently, that rumour was sparked by a Financial Times Deutschland interview with Xavier Huillard, chief executive of French construction firm Vinci, in which Huillard said Vinci was looking to speed up its international expansion, acknowledged that Australia is an ‘interesting market’ and did not rule out any possible tilt at either Leighton or its German parent, Hochtief, when asked specifically about these companies.
Behind these rumours are sentiments that Hochtief’s parent company, Spanish construction giant ACS, may need to offload assets. ACS, which owns Hochtief, which in turn owns 54 per cent of Leighton, booked a first half loss of €1.23 billion in the first half of 2012 and its banks have forced it to start selling down its 20 per cent stake in Spanish utility Iberdrola, which it purchased at the height of the Spanish construction boom. ACS’s net debt at the end of June stood at €8.57 billion.
Despite those figures, speculation surrounding a potential takeover of Leighton appears to be purely that.
For one thing, while Huillard did not rule out a tilt at either Hochtief or Leighton, he did stress that Vinci was looking at more than two companies. Furthermore, contrary to ideas about ACS having to sell its stake in Hochtief or Leighton, the company indicated its intention to actually increase its stake in Hochtief as recently as late August.
Picking out likely takeover moves is guesswork at the best of times. While a takeover of Leighton by Vinci or anyone else cannot be ruled out, there does not appear to be much substance behind these latest rumours.