The Motley Fool

Leighton Holdings Limited jumps 11.4% on acquisition offer: What investors need to know

Shareholders in contractor Leighton Holdings Limited (ASX: LEI) have started the week with the pleasant news that substantial shareholder HOCHTIEF – who currently holds 58.8% of the company – is to offer minority holders $22.15 per share, plus they get to keep the interim dividend of 60 cents per share. The “catch” is that HOCHTIEF is not offering a full takeover, but rather the offer is proportional and based upon acquiring three out of every eight shares held by Leighton shareholders other than HOCHTIEF.

The offer sent the stock to a new 52-week high of $23.15 and represents a premium ranging from 18.8% to 33% depending on which recent metric you choose to use. However on a longer term basis, the offer price is still a long way short of the $40 mark the stock reached in early 2010, or the $60 mark of late 2007.

Foolish takeaway

Shareholders have been advised by Leighton’s Independent Directors “to take no action at this stage.”  With the share price jumping 11.4% to close at $23.09 the market appears to be expecting more action to come before HOCHTIEF succeeds in its bid to raise its stake to 74.2%.

The move by HOCHTIEF could also have the potential to fire up merger and acquisition (M&A) activity in the wider contract-services sector. With many contractors trading near multi-year lows including Transfield Services Limited (ASX: TSE) and Worleyparsons Limited (ASX: WOR), this could be the beginning of a number of M&A plays.

Get this top investor’s #1 ASX tech pick for 2014 – FREE!

The Australian Financial Review calls it "Australasia’s hottest tech stock"… the shares have already rocketed up 700% since 2012! But this may just be the beginning, says one top stock picker. Discover whether you should hit the BUY button today. Simply click here for your FREE copy of "Joe Magyer’s #1 ASX Tech Stock for 2014."

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.