Aton’s offer not so attractive to M & R shareholders

ATON’S three-month extension of the deadline for its long-standing hostile bid to buy out Murray & Roberts (M&R) shareholders has resulted in the offer likely becoming less attractive to M&R shareholders.

This was because M&R share price rocketed 8.64 percent at one stage to R14.83 yesterday, after the Germanybased investment group Aton said it needed to extend the deadline by three months to September 30.

The share closed the day at R14.44c. The time extension represents another delay in the long-standing offer by Aton, first made in March 2018, to acquire M&R shares at R17 each.

The M&R board indicated previously that a fair value should be between R20 to R22 per share for control of the group. Aton holds about 44 percent of M&R, and doesn’t need all that many shares to reach 50 percent.

M&R has, like other major construction groups in South Africa, been facing severe headwinds due to falling private and public spending on infrastructure and other construction projects.

When Aton first presented its R17 per share offer to M&R’s board, the price represented a 77.3 percent premium over the M&R share price on the last day of business, before Aton first notified M&R’s board of the offer.

Yesterday, that premium had narrowed to just more than 12 percent, which according to one analyst, was “no great shakes in the current market conditions”.

The share price also represents a premium over M&R’s net asset value of R13 per share at the end of December 31, 2018.

In addition, M&R has also substantially strengthened its operations since Aton first made its offer.

In the 12 months to June 30, 2017, the last annual results before Aton made its offer M&R’s attributable earnings for the year had slumped to R48 million from R753m the previous year.

But earnings have recovered, increasing 456 percent to R267m by the 2018 year-end. In the six months to December 31, 2018 attributable earnings increased 69 percent to R186m.

M&R also demonstrated its multinational engineering and construction management strengths – effectively countering Aton’s rationale that M&R would benefit from the expertise of a global group – with the acquisition in March of US Terra Nova Technologies for $38m (R537.9m) by a subsidiary of its underground mining platform, and the earlier acquisition of Saulsbury Industries in the US for $5.2m.

Aton said yesterday that it needed to extend the deadline for their offer, because the processes of obtaining a merger-control clearances and/or approvals from the competition authorities for the mandatory offer was still ongoing, and would extend beyond the long stop date.

“Shareholders are reminded that the mandatory offer has not yet been declared unconditional in all respects,” M&R said in a separate announcement.

M&R’s management said in response to questions from Buisness Report yesterday that “due to market demand at the time, the Murray & Roberts share price increased from the outset of the initial Aton offer, which was made in April 2018”.

“The premium offered will automatically narrow over time,” they added.