Aton takeover offer values M&R at R6.7bn

SA company urges shareholders to reject bid Investor says it has no intention to delist group

Aton has confirmed a cash bid for all of Murray & Roberts, but the JSE-listed engineering group is still urging its shareholders to reject the R15 a share offer from the German family investment company, saying it materially undervalues the firm.

Aton said the offer, which values Murray & Roberts at R6.7bn, was a further investment by an “experienced multinational corporation” that underscored confidence in the South African market.

It already holds about 40% of Murray & Roberts shares.

Aton said it had been given the blessing of Murray & Roberts to directly approach the group’s shareholders and this was not a hostile takeover.

But Murray & Roberts has dismissed this interpretation, claiming it is “opportunistic”.

Privately held Aton also said it had no intention to dismantle Murray & Roberts and was not seeking to delist the company. Rather, it supported SA’s and the group’s black economic empowerment undertakings and sought to provide Murray & Roberts with a stable global operating platform. To this end, Aton reiterated its commitment to the long-term strategic sustainability of Murray & Roberts.

“Our intention, of course, is to get a controlling stake in Murray & Roberts,” Aton CEO Thomas Eichelmann said on Tuesday.

“The fact that we have been able to secure agreements with two top 10 shareholders … underpins our contention that our offer represents a significant value ... opportunity for shareholders,” he said. “At the same time, we believe Aton’s proposition and proven track record in the mining industry will be beneficial not only to the shareholders of Murray & Roberts but to other stakeholders. Our interest in Murray & Roberts is of a long-term nature.”

Aton first bought about 4.5% of the company in late 2015, then added another 25.4% stake in early 2017, before reaching a 33.1% shareholding last week. This came after Old Mutual Investment Group appeared to

have sold a small stake, as indicated in the share register on the Murray & Roberts website.

Old Mutual portfolio manager Brian Pyle said on Monday the investment manager had made up its mind to not provide an “irrevocable” undertaking to Aton to accept the R15 a share offer. “[We] think R15 is too low.”

Now, along with a promised 6.5% of Allan Gray’s 10.9% shareholding, Aton effectively holds a 39.6% stake in Murray & Roberts. This translates to about 39.8% of the voting rights.

The R15 a share cash offer is 56.4% above the Murray & Roberts closing price on March 22 2018 and 42.4% above the 30-day volume weighted average price of the group on that date. The independent board of Murray & Roberts said last week a fair value price for control of the group was between R20 and R22 per ordinary share.

In recent years, Murray & Roberts has turned its engineering prowess towards global underground mining, oil and gas, and power and water markets. To this end it sold 100% of its civil construction and building business in SA to black economic empowerment interests.

SBG Securities had earlier valued Murray & Roberts at R19.80 a share, saying that a control premium would push this to between R24 and R26 a share. This contrasted with Renaissance Capital which valued Murray & Roberts ordinary shares at about R11.40 and found the offer “attractive”. The latter said Aton had bought its 25.4% stake in Murray & Roberts in 2017 for R15 a share.

Aton’s offer follows previous engagements between Aton and the Murray & Roberts board regarding a possible transaction between Aton’s Canadian subsidiary, Redpath Mining, and Murray & Roberts’s Cementation business. Both are world leaders in underground mining.

Aton said the parties had discussed numerous transaction structures, including combining these businesses. But Murray & Roberts CEO Henry Laas has said that this was the only overlap between the two groups and would be complicated by competition issues. He also said it was not clear how Aton would manage the dilution of Murray & Roberts’ empowerment ownership credentials and the possible effect on contracts and jobs.

Eichelmann said following consultation with competition law counsel “we are optimistic [that we will] obtain required merger control approvals in due course”. He said Aton’s offer was to the benefit of Murray & Roberts shareholders, the group, staff and the broader economy in terms of new markets and skills and technology transfers.