M&R CEO Henry Laas. PICTURE: Sunday Times
M&R CEO Henry Laas. PICTURE: Sunday Times

Sometimes it’s difficult not to suspect that companies exist to keep lawyers and corporate advisers in business. That seems to be the case at Aton and Murray & Roberts who have been embroiled in a protracted and acrimonious takeover battle for the past 17 months.

Neither of these companies — the former a family-owned Germany-based investment company, the latter a JSE-listed construction and engineering company — emerged well from the battle, which was halted earlier this week.

When the people most disappointed about the termination of a deal are lawyers, advisers and journalists, it’s safe to assume the deal was not only problematic but likely to be hugely value destroying for at least one party. In this case, the aborted bid is certain to have destroyed value for Aton’s owners, as well as having incurred huge fees for M&R shareholders.

Recall that not only was the Takeover Regulation Panel dragged into this deal but the special committee of that panel was also brought in to referee innovative aspects of it; and not only were the competition authorities called upon to defend one or other side, the Competition Appeal Court was also dragged in.

In response to Aton’s notice earlier this week that it was abandoning its R17 a share mandatory offer, M&R’s independent board moved quickly to deflect any anger felt by shareholders who had tendered their shares and now watched as the price slumped back towards R12.

The independent board, set up to consider Aton’s offer, reaffirmed its view that the “fair value price range” for M&R was R20-R22. This week it reminded shareholders, who might have been troubled that their share price was now trading close to 50% of the independent board’s valuation, that the range was backed by an “independent expert opinion”. This reminder may have done nothing more than confirm the suspicions of many that these independent opinions — paid for by the company — are often used as a form of insurance for the directors.

To be expected, M&R will not reveal how much it spent on fees to fight off the unwelcome bidders, but given the extent of that fight, and its occasional ingenuity, it must have run to tens of millions of rand. While shareholders might prefer to see the group’s limited cash resources spent on operational assets, the independent board is entitled to spend whatever money it deems necessary to fulfil its responsibilities in terms of the Companies Act and the Takeover Regulations. Those responsibilities stemmed from the independent board’s belief the Aton offer did not represent fair value.

Now it will be under pressure to demonstrate how realistic its R22 valuation was. Within the next year or two shareholders will want to see evidence that management’s well-considered diversification strategy is bearing fruit. This will require something more substantial than alluring order books.

As for Aton, what was it thinking? Did its advisers not alert it to the possibility the attempted merger might raise competition concerns? Aton has remained shtum throughout the process, occasionally providing monosyllabic responses through its local media consultants, but generally giving the impression it was out of touch. Undoubtedly its smartest, and most entertaining, move was the acquisition of a 25% stake in Aveng, which successful blocked that particular sideshow.

But was it not warned the independent board would use, with maximum affect, the opportunity presented by the competition authorities? With this forewarning it could have worked out how to address, if possible, any concerns. It now says there are no such concerns. The commission seems convinced to the contrary. With the scheduled Competition Tribunal hearing scrapped, we will never know.

And now, what is Aton to do with the 44% stake it holds in a deemed competitor? It says it intends remaining invested in M&R as a significant and supportive shareholder. Of course anything less would have rattled investors, adding to the downward pressure on its investment and making it more expensive to exit even a portion.

However, holding on to as much as 44% might not go down well with the competition authorities. Which means there might be scope for a few more fees before this saga finally ends.