M&R scores mini victory over Aton in bid for Aveng

Shareholder approval to explore transaction

LISTED engineering and construction group Murray & Roberts (M&R) has scored a mini victory in its bid to potentially acquire Aveng by securing shareholding approval to further investigate this transaction.

At a general meeting of M&R shareholders yesterday to consider a resolution in terms of section 126 of the Companies Act, 52.06 percent of M&R shareholders voted in favour of the resolution.

German family-owned investment holding firm Aton, which is M&R’s largest shareholder, with 44.05 percent of its votable shares, indicated it would vote against the resolution. This means that, other than the shares held by Aton, 99.63 percent voted in favour of the resolution.

Aton has made a direct offer to M&R shareholders to acquire all the shares in M&R it does not already own. It has claimed that M&R’s planned acquisition of Aveng was an attempt to frustrate its acquisition of M&R.

Section 126 of the Companies Act deals with the prohibition of frustrating action in the event that a company was subject to an offer.

Present at the meeting, either in person or represented by proxy, were 92.28 percent of M&R’s votable shares.

M&R shares dropped by 0.3 percent to close at R17.74 yesterday.

Henry Laas, the chief executive of M&R, said the meeting was a demonstration of shareholder democracy, because it gave all shareholders an opportunity to express an opinion on whether they wished the board to further explore the potential of the Aveng transaction.

No knee-jerk move Laas added the potential Aveng transaction would be a frustrating action only if M&R proceeded with it without obtaining the approval of shareholders and the Takeover Regulation Panel.

He said the potential transaction was not a knee-jerk reaction to Aton’s offer to acquire M&R.

It was actively pursuing it from the final quarter of last year, long before Aton announced its intention to make a firm offer to acquire the shares in M&R it did not already own.

Sean Chilvers, the senior managing director of Macquarie Advisory and Capital Markets South Africa, claimed the primary objective of the Aveng transaction was to protect Aveng bondholders at the expense of M&R shareholders and to frustrate Aton’s offer for M&R.

Chilvers said there was no clear strategic benefit for M&R, and the intention was merely to frustrate the Aton offer.

“The transaction under consideration would result in substantial value destruction, and the material risk associated with the potential acquisition of Aveng is highly detrimental to M&R and serves as a poison pill to frustrate the Aton offer.

“The proposed transaction is also a strategic U-turn for M&R. It’s a reversal of M&R’s strategy, as M&R will once again be exposed to the highrisk general construction, steel and manufacturing sectors.”

Laas said Aton was entitled to its views, but M&R had a very competent board that would not bring a transaction to shareholders that was not in their best interests.

M&R has stated it was only interested in Aveng’s open-pit mining business, Moolman’s, and its Australian business, McConnell Dowell.

If the transaction proceeded, it would integrate these businesses with its underground mining business, Cementation, and its Australian business, Clough, and dispose of Grinaker-LTA, Aveng’s general construction business, and its steel and manufacturing businesses.

Laas believed M&R would be able to put the proposed Aveng transaction to shareholders in August this year, which meant an offer would be made some time next month.