M&R shares closed yesterday at R14.03 compared with the R9.64 closing price on Friday. Aton, which already owns a 33percent stake in M&R and has a diverse portfolio of investment in the mining, engineering, aviation and health technology sectors, intends to make a cash offer of R15 an M&R share for all the shares it does not own in the group directly to M&R shareholders.
Aton said its offer price represented a significant premium of 54.6percent to the M&R closing share price on Friday and 42.4percent to the 30-day volume weighted average price last Thursday and valued M&R at R6.7billion.
It said the offer also represented a vote of confidence in the South African economy by a large multinational German investor. “It will constitute a significant source of foreign direct investment as it represents potential foreign direct investment of up to R4.5bn into South Africa,” it said.
M&R said Aton had advised the group that it had entered into an agreement to purchase a further about 13.7million M&R ordinary shares or about 3.1percent of M&R’s ordinary share capital, which would increase Aton’s shareholding in the group to 33.1percent.
Aton had also advised M&R that it had obtained an irrevocable undertaking from asset manager Allan Gray on behalf of its clients, representing about 10.9percent of M&R’s ordinary share capital, to accept the proposed Aton offer.
Aton said the R15 a share offer in cash provided an opportunity for shareholders to realise significant and attractive value and crystallise this value in cash and the offer was subject to minimal conditions.
Marc Ter Mors, the global head equity research at SBG Securities, said their target price for M&R was close to R20 a share, adding that the Aton offer price was fair, but did not include a control premium.
Ter Mors said the Aton offer was also very opportunistic, because the M&R share price had lost 43percent in the past four to five months and took advantage of tough cyclical conditions, because it was not paying investors in M&R for the early stages of the recovery in the underground mining sector, while the oil and gas sector was only likely to start improving in the next 12 to 24 months.
Aton said its investment would meaningfully bolster the South African mining and engineering sector and its proposed offer had strong strategic and commercial impetus by including the M&R business portfolio into that of an international player of strength.
M&R said an independent board would review the correspondence received from Aton, particularly the terms that were being proposed to be offered to its shareholders.
Aton was proposing to implement its proposed offer by making an offer directly to the group’s shareholders, but was seeking the co-operation of M&R’s independent board on certain matters relevant to the implement of the offer.
M&R stressed that no offer had been made by Aton yet and a further announcement would be made once its independent board had concluded its review of the proposed Aton offer.