What’s holding Murray back?


What’s holding Murray back?

Published Date: 2019-02-07 | Source: Stephen Gunnion | Author: Stephen Gunnion

What’s holding Murray back?

With under two months until ATON's mandatory offer expires, its shares are still trading below the offer price but shareholders still have time.

Murray & Roberts' shares continue to languish below the R17 German investment firm ATON is offering shareholders in its bid to take control of the company and possibly delist it from the JSE. That's raised the question of how successful ATON's offer is likely to be and whether investors may be holding out for more.

ATON first proposed buying out M&R almost a year ago after the company accumulated a 29.9% stake company. Its initial offer of R15 per share was a 56% premium to the company's share price just before the announcement and was 42% higher than the 30-day volume-weighted average price of the stock at the time. It said the deal offered significant value to shareholders and would have a positive impact on M&R in the long-term while signalling a vote of confidence in the SA mining and engineering sectors.

The German company is owned by the wealthy Helmig family and has interests in technology and service businesses, including mining, automotive engineering and medical technology. It's keen to get its hands on M&R's Underground Mining business, which it plans to merge with its Redpath Mining division if it's successful in gaining control. Underground Mining was the biggest contributor to M&R's earnings last year and ATON says it has a proven track record in the mining industry which will further benefit the company.

It was obliged to raise the offer to minority shareholders to R17 last May after it bought more shares in M&R on the open market at that level. In June, it replaced the voluntary offer with a mandatory offer at the instruction of the Takeover Regulation Panel.

A mandatory offer must be made when a bidder's holding of a target company increases to 35% or more and it must be made at the highest price paid for the relevant shares in the six months preceding the offer. ATON's mandatory offer opened on 5 June last year and contains no minimum acceptance threshold. It remains open and can be accepted by M&R shareholders until 10 business days after the offer has been declared unconditional in all respects. ATON has given an initial long-stop date for declaring the offer unconditional of 31 March, although it can extend it.

At last count, ATON had accumulated a stake of just over 44% in M&R, including shares bought on the open market and the 10.9% fund manager Allan Gray pledged to the group. It's hoping for at least 50% plus one share of the group.

M&R maintains that shareholders don't need to hurry to accept ATON's offer, which it says undervalues the group. An independent expert determined ATON's offer to be unfair but reasonable, while an independent board appointed by M&R said the fair value price range for control of the company was between R20 and R22 per share. M&R also believes that ATON's investment objectives and its own strategic aspirations are not aligned as it evolves from a local civil and building contractor to a multinational engineering and construction group focused on the natural resources market sectors.

Shareholders aside, any deal would still have to be approved by the competition authorities in the countries where M&R operates. What may concern the SA Competition Commission is M&R's stake in Gautrain operator, the Bombela Concession Company, which now sits at 50% and may be viewed as a key national asset.

Chris Gilmour, an independent analyst, says the Public Investment Corporation may hold the trump cards with its more than 20% shareholding in M&R. Last April, it indicated that it would reject ATON's bid and was opposed to delisting the company from the JSE as it would shrink the investable universe on the exchange. With the long-stop date approaching, he doesn't believe it will increase its price any further.

M&R's shares closed at R14.55 yesterday. They traded above R19 early last June but have been below R17 since mid-November.

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