German family-owned investment holding firm Aton, M&R’s largest shareholder with a 39.8percent stake in the group and which has made a hostile takeover bid for M&R, said on Friday that it would not support the transaction. This means M&R faces a mammoth task to get the vast majority of its remaining shareholders to support the proposed transaction.
M&R earlier on Friday reported that its board and Aveng’s board had reached an in-principle agreement on the proposed transaction, but a formal offer had not yet been made.
Aton, whose stated intention was to acquire 50percent plus one share in M&R, said it had not had any engagement with either M&R or Aveng on the transaction, which directly conflicted with M&R’s stated strategy to exit both the infrastructure and building sector and manufacturing.
It said the transaction clearly demonstrated that M&R’s management was putting its interests ahead of those of shareholders and other stakeholders.
Aton’s offer for M&R would lapse if not declared unconditional in terms of acceptances by June 14.
M&R has urged its shareholders to reject the offer, and shareholders who had submitted the required instruction accepting the R15 a share takeover offer from Aton to consider retracting the instruction.
Aton said the proposed Aveng transaction would introduce considerable risk to M&R by significantly increasing its debt burden and because it involved taking over businesses that incurred R6.7bn of losses in its 2017 financial year, the restructuring of significant parts of Aveng’s activities that Aveng itself had been unable to do, and would distract M&R from focusing on sound growth opportunities.
The proposed transaction was subject to “a laundry list of conditions” and its “sole intent appears to be to frustrate Aton’s compelling proposition to M&R shareholders”, Aton said.
However, M&R chief executive Henry Laas was emphatic that the proposed bid for Aveng had not been launched in an attempt to frustrate Aton’s bid for M&R. Laas said M&R’s board in November gave approval for the opportunity with Aveng to be pursued. This was prior to M&R receiving a firm intention letter from Aton in March to make an offer for the group.
Prior to Aton’s rejection of M&R proposed acquisition of Aveng, Laas said he would be making a huge effort to engage Aton about the proposed transaction and had already reached out to the firm to explain the merits of the transaction.
He said M&R had sent Aton “a friendly letter” shortly before the announcement was placed on the JSE’s Stock Exchange News Service (Sens), and an email had also been sent to the firm with possible dates for a meeting.
Laas said they were waiting for Aton’s response.
He said M&R would on June 19 be holding a shareholders' meeting in terms of section 126 of the Companies Act, which dealt with frustrating actions.
Shares in M&R rose 4.03percent on the JSE on Friday to close at R16.01, while Aveng’s shares closed 1.10percent lower at R0.90.