Share trading in construction giant Leighton Holdings is being probed by the corporate regulator in Australia amid concern over a purchase by the company’s majority shareholder was followed by a better than expected profit result only weeks later, newspaper reports say.
According to a report in The Australian, the Australian Securities Investments Commission (ASIC) is set to conduct a routine enquiry into a trade announced to the market of February 3rd which saw the Australian subsidiary of German construction group Hochtief purchase 3.421 million ordinary shares in Leighton to take its voting interest in the company from 57.75 percent to 58.77 percent.
Those trades took place after Leighton’s audit committee (which includes two of Hochtief’s nominee directors on the Leighton board: David Robinson and Peter Sassenfeld) met last month to discuss the company’s annual accounts and seventeen days before Leighton unveiled full year results which saw underlying net profit after tax ($584 million) right at the top of the range of previous guidance provided by the company ($520-$600 million) and the value of the company’s shares surge from around 16.40 to almost 17.25 in a day.
The trades infuriated the Australian Shareholders Association, whose policy and engagement coordinator Stephen Mayne says Leighton directors should have ensured Hochtief ceased trading in the stock as soon as it become clear the company was tracking ahead of market expectations and has called for the matter to be further looked into.
Whilst ASIC declined to comment, the newspaper report suggests the regulator is looking into whether or not Hochtief’s directors on the Leighton board were in possession of price sensitive information when the trades occurred.
Hochtief also did not comment yesterday but earlier denied it had benefited from price sensitive information in a previous letter to Leighton Chairman Robert Humphries.
That letter - a response to comments by Mayne in the Financial Review over that same matter earlier this month - stated the trades took place within a prescribed trading period following Leighton’s earnings announcement for the third quarter and that Hochtief nominee directors on the Leighton board played no role in the purchase of the shares.
Mayne says the latter part of this claim is difficult to fathom.
“When you consider that Hochtief is represented on the Leighton board by its CEO and CFO, the argument that they were unaware of the timing of the share purchase stretches credulity” Mayne is quoted as saying in The Australian’s report this morning.
(Aside from Sassenfeld and Robinson, Hochtief chief executive Mercelino Fernandez Verdes also sits on the Leighton board. No other directors sit on the ten person board under an arrangement between Hochtief and Leighton that the former will not control the latter notwithstanding its majority shareholding.)
“They were certainly in a position to ensure such trades didn’t happen.”