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