Picture: ISTOCK
Picture: ISTOCK

The Murray & Roberts (M&R) share price recorded its steepest fall in seven months following news that the Competition Commission had recommended the Competition Tribunal prohibit the proposed takeover by Aton, a privately-owned German firm.

The share price dropped 16.73% to R11.50, its lowest level in 16 months, within hours of the commission’s announcement. The recommendation could spell the end of a four-year long bid by Aton to get control of one of country’s leading engineering firms.

“The commission found that the merging parties are close competitors and that this transaction will, for both parties, result in the removal of their closest and strongest competitor,” the competition regulator said in a statement released on Friday afternoon.

It said that during its investigation it had uncovered concerns the merged entity “will potentially create a company that has such size and scale that it has the financial wherewithal to throttle competition”. The commission also said the merger would create a company that has the financial muscle to buy projects or to discount projects to such an extent that other companies would not be able to compete.

Aton, which bought an initial stake in M&R in 2015, had built up a holding of 29.99% by April 2018 when it made an offer to shareholders for control. By early June 2018, after increasing its offer to R17 a share, Aton had upped its stake to 44%. The independent board of M&R, which was set up to consider the offer, has consistently urged shareholders to reject the R17 offer and says a “fair-value price range” for control of the company is between R20 and R22 a share.

The commission’s prohibition is the latest in a drawn-out and acrimonious battle for control, which has seen the transaction scrutinised by the Competition Tribunal as well as the Takeover Regulation Panel.

crottya@businesslive.co.za