Swiss construction companies have recently become the targets of take-overs by foreign contractors or investors. The first such acquisition was that of Losinger Group by the French construction giant Bouygues. The long-lasting battle between the UK investment fund Laxey and the largest Swiss construction group, Implenia, however ended differently, when Laxey sold its shareholdings after having failed to take over the Swiss group. Following Laxey’s withdrawal, the Swiss Federal Supreme Court confirmed the Swiss financial markets regulator’s ruling that Laxey had breached the Federal Stock Exchange Act when it failed to disclose that it had acquired a substantial stake in Implenia. Criminal proceedings against Laxey officers are still pending (Decisions 2C_77/2009 and 2C_78/2009 of 11 March 2010).
The Indian Hindustan Construction group (“HCC”) found a more accommodating target in Karl Steiner AG. On 16 March 2010, the press reported that the Mumbai-based HCC would buy 66 percent of Karl Steiner AG, one of the leading Swiss construction companies. Steiner specialises in general contractor work, and in the fields of real estate management and development.
According to press reports, Peter Steiner – who until now was the sole owner of Karl Steiner AG – will remain a minority shareholder and will sell his remaining holdings to HCC in 2014 at a pre-agreed price based on the company’s earnings over the 2010 to 2013 period.
Steiner began preparing for the succession of his business already at the end of last year. In the autumn, he parted with his Real Estate Management Unit, which was sold to Privera AG, and in November he sold Karl Steiner France, a French daughter company, to Compagnie Financière Sainte Colombe.
HCC is active in the field of engineering and construction, infrastructure development, real estate as well as urban development. Through the merger, HCC and Karl Steiner AG hope to capitalize on the growing Indian market, where HHC plans to use the business models successfully developed by Steiner Group.
The transaction, which is expected to close in the second quarter of 2010, is subject to regulatory approval in India and Switzerland.
The transaction is also subject to the Swiss Federal Law on Acquisition of Real Estate by Foreigners (“FLAREF”), also known as the “Lex Koller”, which imposes restrictions on the acquisition by foreign individuals or companies of residential properties in Switzerland. The law provides that a natural or legal person not domiciled in Switzerland may only acquire real estate in certain locations and must obtain specific authorization to do so.
While the law does not impose restrictions on the acquisition by a foreigner of shares in a company which is listed on the stock exchange, even if the company owns real estate located in Switzerland, it does impose some restrictions in respect of the acquisition of even a minority stake in a private company (Art. 4.1 lit. e FLAREF). Indeed, authorization is required for the acquisition by a foreigner of even a small stake in a private real estate company. For other types of private companies, authorization may be required for the acquisition by a foreigner of shares if a substantial proportion of the company’s assets consists of residential properties. It should also be noted that if the foreign purchaser acquires more than a third of the share capital of a company, whether public or private, it may be considered foreign for the purposes of the FLAREF (Art. 6), thereby triggering restrictions on any future acquisition of real property.

By Matthias Scherer and Samuel Moss

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