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Is this the end of M&R’s Aveng plan?

Takeover Special Committee upholds Aton appeal.
Aton has long maintained that M&R’s plan to merge with Aveng doesn’t make sense and is designed to frustrate Aton’s offer to acquire M&R. Image: Moneyweb

An appeal by its German suitor Aton might signal the end of Murray & Roberts’s (M&R) plans to merge with its struggling peer Aveng.

M&R announced to shareholders on Thursday that the Takeover Special Committee had on Wednesday upheld Aton’s appeal against the Takeover Regulation Panel’s (TRP) approval of the Aveng plans.

The ruling was made in terms of Section 126 of the Companies Act, which prohibits frustrating actions by a company while under a takeover offer.

Aton has long maintained that M&R’s Aveng plans do not make sense and are designed to frustrate Aton’s offer to acquire M&R. It submitted a complaint to that effect to the TRP.

In terms of Section 126, the Aveng merger would not have been seen as a frustrating action if shareholders as well as the TRP approved it.

M&R’s shareholders approved the move in June and gave the M&R board the green light to develop the transaction, and so did the TRP.

Aton’s appeal against this decision was, however, upheld on Wednesday, which means that M&R is prohibited from proceeding with the development of the transaction.

According to M&R this is the first case in South Africa in which Section 126 has been tested.

The company said in a statement that it is studying the ruling with its legal team.

It seems highly unlikely that the Aveng transaction will proceed, since Aton hedged it bets by acquiring a 25% shareholding in Aveng. This means it would be able to block the transaction at shareholder level if it did clear the TRP hurdle and progressed to a point where shareholder approval was required.

The level of shareholder approval needed is 75%, so in wanting to stop the transaction it vehemently opposes, Aton still had this ace up its sleeve

M&R’s share price dropped by 1.3% to R17.69 by Thursday afternoon. This is 86% higher than it was 90 days ago.

M&R spokesperson Ed Jardim told Moneyweb that the independent board dealing with the Aton offer has reached out to Georg Denoke, the German group’s new MD. Jardim says the relationship between the two companies has been hostile, and M&R would like to see it normalised.

Regulatory processes in relation to the Aton offer are ongoing, the most important of which is consideration by the competition authorities in different jurisdictions.

If these processes are not completed by March 31 next year, Aton will have to consider extending the offer to M&R shareholders. If the processes are successfully completed before that date, M&R shareholders will have 10 days to decide whether they accept Aton’s offer of R17 per share.

M&R has maintained that the shares are worth between R20 and R22 each.

Aveng said in a statement that it will proceed with its early bond redemption and will publish the terms in the week of August 10.

It will also proceed with the sale of its non-core assets as part of the restructuring of the group, and announced the sale of two properties for about R250 million.

Aveng’s share price dropped by 11.11% or 1c to 8c per share.

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