Murray & Roberts rejects German buy-out offer as ‘opportunistic’
Murray & Roberts has come out swinging, rejecting shareholder Aton’s takeover offer, saying it is “opportunistic” and undervalues the construction and engineering group’s prospects.
On Monday, Aton made a R4.7bn cash offer for the 70% of ordinary shares in Murray & Roberts it does not hold.
Murray & Roberts on Tuesday outlined three scenarios the German investment group might pursue: to buy up 100% of the construction and engineering group and delist it from the JSE; to buy 50% plus one share to become the majority stakeholder; or accrete shares to below a 50% stake.
By late Tuesday, Murray & Roberts had constituted an independent board following a firm offer letter received from Aton. It has appointed BDO SA Services as independent expert.
“The offer is opportunistic and made at a time of unprecedented share price weakness as a consequence of low liquidity, declining valuations of [Murray & Roberts’s] legacy peers in the construction sector and halting of the company’s share buy-back programme in 2017,” said Suresh Kana, chairman of the independent board.
Murray & Roberts said the offer undervalued the company based on its prospects. It also said that the rationale presented by Aton that its bid was good for shareholders, the company, staff and SA’s economy in general was “weak in a number of material respects”.
“Accordingly, the independent board advises that it will be recommending to M&R [Murray & Roberts] shareholders to not accept the offer, when made,” Kana said.
Murray & Roberts said a scenario where Aton “accreted” shares but did not delist the company presented risks to the shareholders and also Aton. These included conflicts of interest, strategic misalignment and reduced strategic flexibility.
Group CEO Henry Laas said on Tuesday that Murray & Roberts and Aton’s mining operations overlapped in the US, Canada and Indonesia, among others, and would draw in competition authorities if Aton held a majority stake in the company.
Aton’s R15-a-share offer valued Murray & Roberts at a total of R6.7bn. It already had an irrevocable undertaking from fund manager Allan Gray, which owned 10.9% of Murray & Roberts, to accept the offer.
But at the proposed offer price, the independent board said the prospects of Aton successfully delisting Murray & Roberts were “very low”. Murray & Roberts also said it was not clear how Aton would manage the dilution of its empowerment ownership credentials and the potential effect of this on material contracts and jobs.
Aton said it believed a successful offer would have a positive effect on Murray & Roberts’s stakeholders, including management and staff — and the SA economy in general. It said it was committed to black economic empowerment and to positioning Murray & Roberts to better withstand volatile and uncertain market conditions.
On Monday, Aton had said its offer was attractive given the uncertain outlook in Murray & Roberts’s key markets. It said the uncertainty was reflected in Murray & Roberts’s order book, which had fallen in each of the financial years since 2015.
Aton said that upon completion of the offer, Murray & Roberts’s management and employees would become part of the “service-oriented” investment portfolio of Aton in Africa, the Americas, Asia and Europe.