PRETORIA – Murray & Roberts (M&R) group chief executive Henry Laas believes the hostile takeover bid for the listed engineering and construction group by German family-owned holding company Aton was likely to be successful.
This was despite M&R’s independent board’s view that Aton’s increased cash offer price of R17 a M&R share remained below its fair-value price range of between R20 and R22 a share for control of the group.
“It’s likely the transaction will go through. I think Aton will get the regulatory approvals, but it will come with conditions. But it may be that they decide that they don’t want to accept the conditions,” he said.
Laas was unsure whether Aton would obtain all the competition authority approvals before the end of next month, adding that Aton could not make an unconditional offer for M&R without those approvals.
Aton currently owns 44 percent of M&R’s shares and has given an initial long-stop date of March 31 for declaring the offer unconditional, but it could extend it.
Laas said Aton had indicated it was not going to increase their offer, and it would ultimately be up to shareholders to decide.
“My personal view is that many M&R shareholders will accept the R17 a share. Although we believe the true value is between R20 and R22 a share, the share has not traded there for a long time.
“Late last year, all shares came under a bit of pressure, and M&R was trading at about R14.50 a share. It’s likely most shareholders would accept R17 a share. Aton don’t need much to get to 50 percent (shareholding level),” he said.
However, Laas believed the proposed transaction would be fraught with complications, because the Public Investment Corporation (PIC) held 22 percent of M&R, and M&R, through various trusts, held a further about 10 percent of the group’s shares.
“Whether the PIC will sell at R17 a share is a different story, because for them it’s not only about the investment but the South African asset and those other factors which also come into play for a government entity such as the PIC,” he said.
Laas added that if Aton obtained all the competition authority approvals and sufficient support for their offer from shareholders to increase its shareholding in M&R to 60 percent, for instance, this could result in a situation where the tradability of and liquidity in M&R’s shares became a challenge, particularly with the PIC and M&R together owning more than 32 percent of the group’s shares.
He said this would result in a situation where there were insufficient volumes in the market to trade, and, in that scenario, it was unlikely M&R’s shares would trade sufficiently on the JSE for the share price to increase to what they believed was the true value of the share.
In terms of the JSE’s listing requirements, a company listed on the main board must also have 20 percent of each class of equity securities held by the public to ensure reasonable liquidity.
Aton does not have any representation on M&R’s board.
But Laas believed this was by design, because it would be conflicted with inside information if it did, and Aton would start to influence and make changes to the board once this proposed transaction had played itself out.
“Aton are essentially the controlling shareholder today, but are just not behaving as such because of the offer.
“With them owning 44 percent, if less than 80 percent of the shares in M&R vote at an annual general meeting, they will have the majority vote,” he said.
M&R shares fell 1.43 percent on Wednesday to close at R13.80.