Aton deal adds to M&R’s troubles

• German group lifts stake to 39.8%, increasing pressure on construction company to get shareholder approval for proposed merger

German-based conglomerate Aton has increased its shareholding in Murray & Roberts (M&R) to 39.8% in buying an additional 6,600 shares in the group. The share purchase adds to the pressure faced by M&R to get the necessary shareholder backing for its proposed tie-up with Aveng.

German-based conglomerate Aton has increased its shareholding in Murray & Roberts (M&R) to 39.8% in buying an additional 6,600 shares in the group. The share purchase adds to the pressure facing M&R to get the necessary shareholder backing for its proposed tie-up with Aveng.

The M&R board will have to secure approval from 50% plus one shareholder at not one but two meetings if it wants to finalise the Aveng deal. The deal has been structured so it requires only an ordinary resolution. In addition, any tie-up will have to get approval from the competition authorities, which might be time consuming given M&R’s history with the Competition Commission.

The conditional approval granted by the Takeover Regulation Panel (TRP) is the first of its kind in terms of the Companies Act of 2008. The TRP has required M&R to get shareholders to approve the proposed transaction with Aveng.

This is designed to give the shareholders an opportunity to declare whether or not they believe the transaction represents a “frustrating action” by the M&R board. Depending on the outcome of this vote, which will be held on June 19, shareholders will then get an opportunity to vote on the transaction.

Section 126 of the act prohibits the board of a company from taking action that could undermine an offer that has already been made. M&R has said it initiated talks with Aveng before Aton announced its offer in March. However, it did not issue a Sens announcement about these talks until mid-May.

TRP executive director Lucky Phakeng told Business Day on Tuesday it was not necessary for firms to issue Sens statements every time “somebody knocks on the door to talk about asset restructurings”.

“The board must make a call on when an announcement should be made.”

Ed Jardim, group communications executive at M&R, said the group presented board minutes and letters to the TRP to prove the discussions had commenced before the Aton offer was announced. Jardim said if 50% plus one of the shareholders voted in favour in June there would be a second shareholder meeting in August to vote on whether to approve the deal.

The TRP has also invited any M&R shareholder “who wishes to make representations relating to the granting of approval” to do so by June 12.

Jardim is not underestimating the extent of the challenge facing the board. At most shareholder meetings a vote of 39.6% is sufficient to block an ordinary resolution. Given the context of the vote there might be a larger turnout. “We’ve done a lot of work canvassing our shareholders and we believe we’ve got big support.”

Jardim does not believe the competition authorities will be an issue as there is no overlap between the M&R operations and those of Aveng.