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Stranded bean counter has much to ponder

IT HAS been a long week for Leighton Holdings chief bean counter and former senior Qantas executive Peter Gregg. Bunkered down in Dubai yesterday after an aborted trip to Germany, Gregg tried to distance himself from the unfolding acts in both Qantas and Leighton.

In terms of Qantas, Gregg was plastered all over the media on Monday after an article appeared in The Australian Financial Review speculating that he and a business associate had met with some Qantas shareholders to harness support for an alternative strategy. The proposal was to take a stake in Qantas, get board representation and then push for a new strategy that would include selling Qantas' highly profitable Frequent Flyer business, floating Jetstar and beefing up its presence in Asia.

While Gregg denies supporting a plan to destabilise Qantas, he has not denied giving his opinion on the airline and its strategy to investors - when they asked for it.

The news came as well-placed sources said the group, known as Global Aviation Asset Management, which has investors including Gregg, Geoff Dixon, the Lieberman family and John Singleton, was getting close to making a decision on whether to make a move on Qantas.

Wearing his other hat at Leighton, Gregg will undoubtedly be watching with interest the implications of the latest twist in the Hotchtief/ACS Actividades de Construccion y Servicios saga.

The latest development at the German-based Hochtief can only be described as a coup and the only logical conclusion is that Spain's ACS will next turn its attention to the Leighton board and any executives and directors who aligned themselves too closely with the Germans.


It is a complicated structure and the relationship between Leighton, Hochtief and ACS is equally complex. To put it into perspective, Hochtief owns 54 per cent of Leighton and Hochtief is 54 per cent owned by ACS, which launched a hostile battle for control of Hochtief in late 2010 when Wal King retired.

The talk at the time was that ACS made the move because it was concerned that Leighton, regarded as the jewel in Hochtief's crown, would go off the rails. Given the mess that has since erupted at Leighton, it was not wrong.

Gregg and six other Leighton executives were en route to Hochtief's headquarters in Essen last week for a meeting when they were told it had been cancelled. Gregg stayed in Dubai and Leighton chief executive Hamish Tyrwhitt continued on to Europe.

Five days later, on November 17, Hochtief issued a statement that its chief executive and chairman, Frank Stieler, would resign and be replaced by Spain's Marcelino Fernandez Verdes, subject to a meeting of the supervisory board on Tuesday.

It is the next step in ACS's grand plan to control Hochtief and get closer to Hochtief's main profit earner, Leighton. Interestingly, Verdes joined the board of Leighton last month, after being appointed an alternative director in May. He speaks fluent Spanish and English and is believed to get on well with Tyrwhitt. But the big question is how his elevation to the top job at Hochtief will be accepted and whether it is a precursor to a break-up of the German construction company and a direct line to Leighton.

After an emotionally charged takeover battle for Hochtief in 2010 and the early part of 2011, the Spaniards took it quietly. They are now cranking up the pace of change. Some believe the installation of Verdes was due to growing tensions between ACS and Hochtief and that once the new order is in place a new model will be installed that will result in some rationalisation at Hochtief as a result of which Spain will become centre of the universe.

But the saga isn't over. ACS is shouldering a mountain of debt, its investment in Hochtief is badly underwater and most of ACS's work is leveraged to the problem Spanish economy. To put it into perspective, when ACS first made a bid for Hochtief, Leighton's shares were trading at $38. They closed on Monday at $16.60.

ACS's group net debt was €9.2 billion ($A11.3 billion) in the nine months to September 30, which is almost double ACS's €4.9 billion market value. If the banks put pressure on ACS to reduce debt, it could have a profound impact on Hochtief and Leighton, including asset sales or something more radical.

The company lost another executive last week, Karen Pedersen. Craig van der Laan left in March.