The German-based private investment holding firm, which already owns 29 percent of M&R, offered to buy the rest of the firm’s shares directly from shareholders at R15 an ordinary share.
Aton said its offer price represented a significant premium of 54.6% to the M&R closing share price last Friday, and 42.4percent to the 30-day volume weighted average price last Thursday, and valued M&R at R6.7billion.
In a statement released yesterday, M&R’s independent board said: “The cash offer price of R15 per Murray & Roberts’ share materially undervalues the company based on its prospects.”
The board said the share price weakness was as a consequence of low liquidity, declining valuations of its legacy peers in the construction sector and halting of the company’s share buy-back programme last year.
M&R shares shed up to 11percent on the JSE during intraday trade, but later recovered to end the day 4.13 percent lower at R13.45 yesterday.
The M&R board said the rationale presented by Aton for the company and South Africa was weak in a number of material respects.
“At the proposed offer price, the Independent Board is of the view that the prospects of Aton successfully delisting Murray & Roberts is very low.”
“Scenarios where Aton accretes its shareholding but does not delist Murray & Roberts presents risks to Murray & Roberts’ shareholders and Aton, including conflicts of interest, strategic misalignment and reduced strategic flexibility, and potentially casts the company adrift into a protracted period of uncertainty as Aton gradually increases its shareholding and attempts occasionally to delist the company.
“It is not clear how Aton proposes to manage the dilution of Murray & Roberts’ B-BBEE ownership credentials and the potential resultant impact on material contracts and employment,” the board said.
The board said it would be recommending to Murray & Roberts’ shareholders to not accept the offer, when made.
M&R surged by 45.54percent on Monday, after it reported that Aton had notified it of its intention to make a firm offer to acquire the entire group.
Aton said this week that the offer also represented a vote of confidence in the South African economy by a large, multinational German investor.
“It represents potential foreign direct investment of up to R4.5bn,” it said.
Marc Ter Mors, the global head: equity research at SBG Securities, said this week that 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 also said the Aton offer was 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.