Interview with Hochtief CEO Lütkestratkötter Qatar Investment 'Not an Act of Desperation'

Since September, the German construction giant Hochtief has been fighting off a takeover bid by the Spanish company ACS. SPIEGEL spoke to Hochtief CEO Herbert Lütkestratkötter about the recent investment from Qatar, his wariness of the Spaniards and why he is uninterested in a high severance payment.
A crane belonging to Hochtief at a construction site in Berlin.

A crane belonging to Hochtief at a construction site in Berlin.

Foto: dapd

SPIEGEL: Mr. Lütkestratkötter, for months you have campaigned energetically against the takeover of Hochtief by major Spanish shareholder ACS. Now you have announced that the Emirate of Qatar will be a new major shareholder. Isn't this an act of desperation?

Lütkestratkötter: It's strategy, not an act of desperation. The talks with Qatar haven't exactly been going on since yesterday. We have been active there for a long time. We are quite clearly an attractive partner for Qatar, and the reverse is also the case. They aren't investing in our company out of desperation.

SPIEGEL: Still, it seems clear that you are merely trying to erect more obstacles for ACS.

Lütkestratkötter: The goal was and still is exclusively business-related. I want even better business deals for Hochtief.

SPIEGEL: If it's a purely strategic partnership, why are you having the decision on Qatar's investment made by the ad-hoc committee of the supervisory board, which has no ACS members and was only established to fight off the takeover?

Lütkestratkötter: We have been in a special situation since the announcement of the ACS takeover bid. The entire supervisory board decided to form the ad-hoc committee, and to give it extensive powers. The ad-hoc committee is completely independent.

SPIEGEL: The investment by Qatar Holding is being done through a capital increase. At the same time, you are saying that Hochtief is one of the best-capitalized construction companies worldwide. That's a contradiction.

Lütkestratkötter: If you see it that way, I respect that. However, we had a supervisory board meeting on Sept. 9, in which we, together with ACS representatives, approved a bond issue for half a billion euros. There was no objection, not even to an alternative capital increase. Exactly one week later, however, ACS announced its intention to acquire the majority in our company. That was when the banks said: You can forget about the bond.

SPIEGEL: If it's about money, why are you excluding the subscription rights for all other shareholders? ACS too would certainly have been eager to invest at that price.

Lütkestratkötter: That was one of the options approved at the shareholders' meeting. We found an investor whom we could tie to us in this manner. If it seems as if the move were intended to obstruct ACS, it's a side effect I have to accept. Just look at how the capital market reacted. Our share price has risen significantly since Qatar came on board.

SPIEGEL: The rise in the share price could be coming too late. Until now, your share price has hobbled along at a relatively low level, which was one of the reasons Hochtief became a takeover candidate. You didn't manage to make Hochtief stock attractive.

Lütkestratkötter: That's nonsense. You have to consider that we had a serious economic crisis. Our share price fell to €20 ($27), but since then it has recovered to more than €60 today. I'm the last person who wouldn't admit to mistakes. But I don't see any here.

SPIEGEL: A major Hochtief shareholder, Southeastern Asset Management, is calling for the resignation of all members of the supervisory board and of the executive board members who were involved in the decision to increase capital.

Lütkestratkötter: Once we had determined that Qatar's investment made economic and strategic sense, our lawyers looked into whether the capital increase was watertight. Everyone who claimed that the only purpose of the measure was to fend off a takeover was grasping at nothing. I am convinced that we have not violated any laws. The majority of our shareholders, including ACS, welcomed the investment by Qatar Holding.

SPIEGEL: The fact is, though, that all other defensive measures proved ineffective. The Qatar investment is the first poisoned arrow to have hit its mark.

Lütkestratkötter: It's certainly odd to hear toxicological vocabulary being used to describe everything we are doing here: poison-tipped arrows, poison pills and whatever else. If you look at the steps taken in the recent past, you will not find anything that was exclusively defensive in nature. I am the trustee for our shareholders, and that means all of our shareholders.

SPIEGEL: At the last shareholders' meeting, you managed to wrest a decision from shareholders to adopt an anticipatory resolution that allows you to increase share capital by another 20 percent. Why are you making use of this option?

Lütkestratkötter: We don't have any such plans at the moment. And when you have 96 percent of votes at a shareholders' meeting, you can't exactly call it "wresting" a decision from shareholders.

SPIEGEL: Chancellor Angela Merkel introduced you to the Qatari economics minister at a reception given by the German president at Bellevue Palace. What other role did she play in the deal?

Lütkestratkötter: None. But I think it's wonderful that the government and, in particular, Ms. Merkel, are constantly offering platforms for German industry to conduct economic talks on the sidelines of political talks. After all, it isn't the job of governments to intervene in economic processes.

SPIEGEL: You yourself urged the government to amend the Takeover Act in your favor. Merkel's role in helping to establish contacts was much more effective.

Lütkestratkötter: Yes, it was more effective. But the two things have nothing to do with each other. The amendment of the Takeover Act is still a necessity, not because of Hochtief, but so that the German economy will be subject to the same conditions that apply almost everywhere in Europe.

SPIEGEL: ACS needed another 14,000 shares worth a total of just under €800,000 to surpass the 30-percent threshold. Then the Spaniards would have been able to continue buying shares, without further compulsory offers, until they had the majority. But with Qatar's investment, ACS must now come up with 2.1 million shares, worth almost €120 million, to surpass 30 percent. How do expect the Spaniards to react?

Lütkestratkötter: ACS, like many of our shareholders, welcomed Qatar Holding as a partner.

SPIEGEL: But ACS also stressed that the shares of all Hochtief shareholders would be diluted by the capital increase, and that this was a bad design.

Lütkestratkötter: I can't understand that. After all, the assets of all of our shareholders -- including the Spaniards -- have grown considerably in the last few days.

SPIEGEL: You even expect appreciation for your move?

Lütkestratkötter: I don't expect appreciation. But if the Spaniards, as shareholders, want to talk to me and declare a different position than the market is doing at the moment, I won't make myself unavailable to them. I'm here.

SPIEGEL: That sounds like mockery!

Lütkestratkötter: No, I'm a man of communication and open to any dialogue, including with ACS, of course.

SPIEGEL: Does that mean that there are no talks with the Spaniards at the moment?

Lütkestratkötter: No, and there are good reasons for that.

SPIEGEL: Which would be?

'I Am a Man of Communication'

Lütkestratkötter: Look, I didn't take a vacation all year because business at Hochtief was so demanding. Besides, I have colleagues with children to whom I wanted to give preference. At the last supervisory board meeting before my vacation, on Sept. 9, the people from ACS congratulated us on Hochtief's strong performance and said I had earned a few days of relaxation. They also asked me where I was going. I told them the truth and said I was going climbing in Austria. Their response to that was: Good, it isn't too far away.

SPIEGEL: Is that a reason not to talk to ACS anymore?

Lütkestratkötter: No, of course not. It isn't about me. But only seven days later, I knew what their question was really about. I was on vacation when I received the news that ACS was trying to increase its share of Hochtief to take us over.

SPIEGEL: Do you believe that this action was deliberately taken during your vacation?

Lütkestratkötter: Officially, we were told that there was a leak. Then the ACS shares were removed from active trading in the market. At that point, it was clear that it wasn't just a rumor.

SPIEGEL: And you haven't spoken to ACS CEO Florentino Pérez since then?

Lütkestratkötter: I tried. The flight was already booked, and I was on my way to Madrid from where I was on vacation. But we cancelled the trip at the last minute.


Lütkestratkötter: At that point, we weren't even familiar with the bid ACS was going to make. In that situation, we felt that it would be inopportune to talk about something that didn't even exist yet. So we put the talks that had been going on until then on hold.

SPIEGEL: But now the ACS bid is on the table. When will you call Mr. Pérez?

Lütkestratkötter: The bid consists of more than 1,200 pages. It's a thick book, and we will comment on it soon.

SPIEGEL: At some point you will have to sit down with the Spaniards to negotiate a solution. How much longer do you want to wait?

Lütkestratkötter: Once again, I'm a man of communication, and I don't make myself unavailable. I'm not even talking about a hostile takeover. Mr. Pérez and I -- we have different interests. And I have to do things that the Spaniards don't like. It's the nature of the beast.

SPIEGEL: Once again: When do you start negotiations?

Lütkestratkötter: Until now, we didn't know what strategy ACS was pursuing. That would be one of the basic conditions.

SPIEGEL: The strategy had been written about in the press. From the Spaniards' perspective, ACS and Hochtief are an excellent fit, because they operate in completely different regions of the world. They hope that the enormous size of the company will provide them more growth and orders.

Lütkestratkötter: If that were the strategy, I would be very skeptical.


Lütkestratkötter: Because we have learned in the construction industry that size alone isn't an advantage. It's about knowledge and presence in the economically attractive regions of the world. Hochtief is very well-positioned in this regard, and I don't see how ACS could be beneficial to us.

SPIEGEL: Why are you so strongly opposed to a takeover? After all, there is a "change of control" clause in your contract that guarantees you a high severance payment in the event of a change in ownership.

Lütkestratkötter: I work for this company, and I do so out of total conviction. I'm not interested in severance payments. And I haven't even figured out how much it would be.

SPIEGEL: We're talking about €4 million in compensation for you and substantial pension payments. The payments for the entire management board would add up to more than €35 million. This doesn't appeal to you?

Lütkestratkötter: No, it doesn't. I'm 60 years old and have been working for the company for seven years. Hochtief has developed extremely well during that time. I have nothing to prove. We have good numbers and an effective strategy. It should remain that way, and that's what I'm for. I'm not sitting here waiting for a severance package. I still have too much to do, in Qatar, for example.

SPIEGEL: Where is Hochtief involved there today?

Lütkestratkötter: We are building the Barwa Commercial Avenue, an eight-kilometer shopping avenue with shops, hotels and residential buildings. It represents a construction volume of €1.3 billion. The project is going extremely well. On the basis of this strong cooperation, we have entered into a joint venture agreement to build the new city of Lusail, which will house 200,000 people one day. That includes a complete infrastructure. And then there is the Bahrain Qatar Causeway, a bridge that's also worth more than a billion euros. We have already provided substantial planning services for that project.

SPIEGEL: It all sounds a little megalomaniacal.

Lütkestratkötter: Qatar is planning very prudently for its future. If we can contribute to this, it's something I can only welcome.

SPIEGEL: With its investment, did Qatar also bring along construction contracts for the 2022 World Cup?

Lütkestratkötter: The investment in Hochtief and the football World Cup were happening more or less in parallel, but they were completely independent of one another. We were pleased that Qatar was awarded the World Cup. There is a declaration of intent that states that, in addition to the projects described, we are also to be involved in the football World Cup.

SPIEGEL: In what form?

Lütkestratkötter: Qatar wants to build a new generation of stadiums, which are to be dismantled after the World Cup and given to other countries -- countries that are also enthusiastic about football but can't afford stadiums like that. I think that's a sensational idea. Qatar is enthusiastic about football. The people are looking forward to the games and to the stadiums. And I'll be pleased if we're permitted to build a large share of it.

Interview conducted by Janko Tietz and Frank Dohmen
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