Is it about time ASIC took the gloves off and gave someone in the market a big whack?
It could be the situation at Leighton (LEI).
Remember what I wrote yesterday about Leighton not being able to explain a big (more than 12%) price rise on Thursday and Friday after being queried by the ASX?
That surge in buying saw Leighton shares hit their highest levels in 12 months on Friday at $20.72, up from $18.15 on Thursday morning.
Leighton said it was not aware of any information that could explain the trading in its stock and had no explanation for the price change.
The ASX also queried an increase in the volume of trading in Leighton’s shares, with some 2.6 million shares traded on Friday morning, and 2.9 million for the full day.
In total 8 million shares were traded on Thursday and Friday, against the normal volume of around one million a day. Around seven million shares were traded on Monday.
Brokers pointed out that Leighton was also one of the five most shorted stocks on the ASX, so much of yesterday’s volume would have been shorters covering their positions to protect against losses.
The surge in Leighton’s share price comes a week after Germany’s Hochtief, Leighton’s controlling investor, said it would continue buying Leighton shares.
Hochtief acquired some 3.4 million shares in Leighton between December 27 and February 3, increasing its total stake to 198.2 million shares or 58.77%.
The Financial Review reported this morning that the buying is being probed by ASIC.
Under Australian corporate laws Hochtief can buy 3% of the company every six months, which it has been doing now for a year or so.
And suddenly yesterday morning, Hochtief produces what amounts to a partial offer for just over 17% of the company at a price of $22.15, plus the final dividend.
The offer will cost Hochtief $1.15 billion.
The bid is designed to take the German company’s stake to 74% and not breach the 75% level which would trigger a change of control clause in many of Leighton’s bank loans and facilities (which finance many of its projects here and around the world).
Leighton shares ended at $23.09, above the offer price and up 11.4% on the day.
A spokesman for ASIC said the regulator was looking at the trading last week ahead of the offer’s announcement yesterday.
In fact just on the volume on Thursday and Friday in Leighton shares, the selling shareholders have lost more than $30 million (compared with the offer price), which even in these high-priced days on the market, isn’t to be sneezed at.
ASIC has to find out who was doing the buying (Hochtief or its advisers) or third parties who may or may not have been aware of the impending offer because there had been a leak.
On the face of it, there’s a suggestion of very informed trading, but that is very hard to prove in Australia.
The bid comes ahead of Leighton’s May 14 annual meeting, where a number of directors are up for re-election.
In a statement to the ASX yesterday, Leighton said the offer will result in a change in the board, with more representatives from Hochtief, and the likelihood that some independent directors will leave the board.
It said it intends to keep Bob Humphris as the independent chairman.
It will be interesting to see whether Mr Humphris supports the cash offer in the interests of all shareholders given Hochtief will effectively control the board.
Leighton is controlled by Hochtief, which in turn is controlled by Spain’s ACS group, which is effectively running the show. Leighton contributes the lion’s share of Hochtief’s earnings.
The partial bid is a done deal.
