M&R’s mystery tour
Some basic facts about the Aton, M&R and Aveng ménage à trois are obvious, but the future could hold surprises
Aton’s revised R17/a share offer for Murray & Roberts and M&R’s proposed tie-up with Aveng is starting to sound like former US defence secretary Donald Rumsfeld’s take on whether Iraq was supplying weapons of mass destruction to "terrorists" in 2002.
"As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know," Rumsfeld infamously mused.
When it comes to the M&R takeover saga, Aton’s revised and now "mandatory" offer that takes into account "heightened interest" from a possible Aveng transaction is a "known known". So is the M&R independent board’s assertion that this still undervalues the company, and that a fair price is between R20 and R22/share.
But there are also "known unknowns", such as whether Aton — which now holds about 44% of M&R — will get 50% of the company plus one share that it wants for control, especially as it has now waived this condition.
Also, what will happen to M&R if Aton becomes the majority shareholder — and will the Public Investment Corp, which holds a big chunk of M&R, allow this to happen?
And what happens to broad-based BEE in terms of the voluntary rebuild programme, as agreed between government and seven major JSE-listed construction groups? This process requires the sale of at least 40% of civil engineering assets in SA, or years of mentorship for empowerment contractors.
Then there are the "unknown unknowns". And in post-Zuma SA, there are lots of those.
But let us go back to the "known knowns": M&R and Aveng have in principle agreed to a proposed all-share tie-up of M&R’s oil and gas and underground mining units (Clough and Cementation) with Aveng’s McConnell Dowell and Moolmans businesses, which operate widely in Africa and Australasia.
Coronation Fund Managers, which holds 20.7% of Aveng, says it supports a tie-up.
But Quinton Ivan, head of SA equity research at Coronation Asset Management, says now that Aton owns close to 44% of M&R it puts the German investment firm in a stronger position to block the proposed merger with Aveng.
"M&R and Aveng management are hoping to engage with Aton in the near future to convince them that the proposed transaction has merit.
"If they fail, then it is unlikely that the transaction will succeed as M&R is unlikely to obtain the required 50.1% shareholder support," he says.
Following a recent hearing into complaints by Aton and M&R’s independent board, the Takeover Regulation Panel ruled that Aton must submit a new, mandatory offer for M&R with a higher price, taking into account heightened interest from a possible Aveng transaction.
Aton duly lifted its offer from R15 to R17 an ordinary share.
This allowed both M&R and Aton to claim victory for their respective shareholders.
But in reality, it is still not clear which of the main protagonists is the main beneficiary of the takeover committee’s intervention.
Meanwhile, the committee also ruled that M&R CEO Henry Laas must refrain from public statements about the Aton offer.
It has now clarified this position, stating that its ruling only prohibits Laas from making comments on behalf of M&R’s independent board with respect to the offer.
So it is now a "known known" that Laas, in his capacity as group CEO, will continue to update all stakeholders regarding the affairs of M&R, including in relation to matters concerning the Aton offer process.