Ann Crotty Writer-at-large
Picture: 123RF/STOCK PHOTO
Picture: 123RF/STOCK PHOTO

In another dramatic twist in the battle by German engineering group Aton to acquire control of Murray & Roberts, the regulatory authorities have prohibited M&R from proceeding with its attempt to get control of Aveng.

News of the ruling by the takeover special committee (TSC) knocked Aveng’s share price to a record low of 8c as investors feared that without M&R’s R1bn bid, the outlook for heavily indebted Aveng looks grim. As part of the bid, M&R planned early redemption of Aveng’s bonds, which have a nominal value of R2bn.

The M&R share price was slightly weaker on Thursday, but at R17.69 remains comfortably above Aton’s R17 a share offer.

The ruling by the TSC, which overturns a June decision by the takeover regulation panel (TRP) that the M&R-Aveng transaction could proceed, leaves the way clear for Aton to proceed with its takeover offer without the distraction of M&R’s bid for Aveng running concurrently. It will also save Aton from incurring the additional costs related to the Aveng acquisition.

The latest decision by the TSC comes just weeks after Aton, in what was deemed a desperate bid to block the Aveng deal, acquired a 25.4% stake in Aveng itself. That stake was sufficient to prevent M&R getting the necessary 75% support from Aveng shareholders.

In a hard-hitting ruling, the TSC said there were few issues on which Aton and M&R were prepared to agree on.

"However, one of those issues is that the potential Aveng transaction indeed constitutes frustrating action."

However, one analyst said on Thursday that Aton’s acquisition of the Aveng stake could itself have been deemed a frustrating action and that the TSC ruling is a much more decisive way of killing the deal.

"Every issue around Aton’s bid for M&R has been contested, so it’s possible the independent board of M&R would have appealed Aton’s purchase of the 25.4% stake in Aveng to the TRP," said the analyst, who spoke on condition of anonymity.

Chris Ewing, chairman of the TSC, has taken a wide interpretation of the TRP’s obligations in terms of the Companies Act. He said there were many factors that had to be considered, including whether approval of the frustrating action would deter investment and whether approval would prejudice market integrity.

Ewing said the interests of all stakeholders, not just the shareholders, must be given appropriate weight and proper consideration. The TRP must "give considerable weight to the fact that a majority of the shareholders approved the frustrating action but the panel is not bound thereby," he said.

Other factors that had to be considered, said Ewing, were that the independent board of M&R did not support the Aton offer, and the manner in which the board conducted itself.

The board failed, for example, to disclose at the first TSC hearing in May that the potential Aveng transaction was to be announced just two days after that hearing concluded, he said.

In May the TSC ordered M&R CEO Henry Lass to refrain from making statements about the deal on behalf of the independent board of M&R.

M&R said it was reviewing the TSC ruling.

Aton did not respond to requests for comment.

crottya@bdfm.co.za

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