RUMOURS about a potential takeover saw Leighton shares jump more than 8 per cent to close $1.32 higher at $17.05 yesterday, along with confirmation its desalination plant is now producing drinking water.
News that a French construction company could be interested in Hochtief’s Australian asset, Leighton Holdings, and a large late trade on Friday afternoon sent investors with short positions scrambling to cover themselves.
A Financial Times Deutschland interview with Xavier Huillard, chief executive of Vinci, revealed ”mergers and acquisitions are in [Vinci’s] genes” and that he finds Australia an ”interesting market”.
He agreed Vinci could be interested in particular activities of debt-laden Spanish firm ACS, which is the biggest shareholder in Hochtief, which owns 54 per cent of Leighton Holdings.
However, Vinci also likes to have full control of its investments, Mr Huillard said, and with Leighton’s complex ownership structure it would not have full control of the Australian company.
Leighton spokesman Justin Grogan said: ”We have no comment to make on the rumour which is a matter of speculation about our major shareholder and their major shareholder.”
A more likely explanation for yesterday’s 8.4 per cent jump against a market that closed 0.3 per cent higher was investors covering their short positions at the ”sniff of a takeover”, according to Commonwealth Bank equity analyst Ben Brownette.
”When you see that kind of volume go through a stock in that circumstance it would appear to be short covering,” he said.
Investors with short positions purchase shares when they believe the share price has bottomed.
Mr Brownette added that talk of Leighton as an acquisition target demonstrates how attractive the company’s geographical footprint across Australia and Asia is to global construction firms and illustrates how undervalued the stock is.
Leighton Holdings yesterday also revealed drinking water has been flowing for seven days from one of three streams at the desalination plant being built by its subsidiary Thiess in Victoria’s south-east. It made the announcement after construction partner Suez Environment put out a similar one on Friday afternoon.
However, the consortium – dubbed AquaSure – will still be denied revenue of $1.8 million per day from the Victorian government until it is operating at full capacity. Leighton has already flagged a $106 million hit to this year’s earnings because of delays at the plant.
”Under the contract, as per most public-private partnership contracts, payments do not commence until project milestones are met,” a spokeswoman for Water Minister Peter Walsh said.
”The current work program has the plant being finished by February 2013. The full payment of the holding charge of $654 million per annum will commence at that time.”
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