Engineering and construction group Murray & Roberts (M&R) revealed on Friday that it has been in talks with rival Aveng since late last year about a possible take-over of the cash-strapped company.
No formal offer has been made and the matter will be discussed at a general shareholders meeting on June 19.
This comes against the background of M&R’s German shareholder Aton’s efforts to take over M&R and possibly delist it. An independent report has advised shareholders against this transaction, saying it under-values M&R. This position is supported by M&R management.
Aton holds about 40% in M&R.
Aveng has been facing huge debt and liquidity problems and the proposed take-over by M&R includes an undertaking to settle R2 billion of Aveng’s debt due in 2019.
M&R envisages that it would acquire all the issued shares in Aveng and shares still to be issued for a consideration of R1 billion, on condition that Aveng successfully completes its planned rights offer of at least R300 million. Aveng said on Friday it hopes to raise R500 million.
If the transaction proceeds, M&R plans to delist it, Aveng said in an announcement on Friday.
M&R CEO Henry Laas said: “The primary objective of the potential transaction is to establish a large multinational engineering and construction group with the scale necessary to compete more effectively in relevant markets. In this context, the Group believes that the strategic rationale for the potential combination of Murray & Roberts and Aveng is compelling for both Murray & Roberts and Aveng stakeholders. The boards of directors of Murray & Roberts and Aveng have agreed to enter into formal negotiations with regards to the potential transaction.
“Murray & Roberts has been evaluating the potential transaction since the fourth quarter of 2017,” he added. Discussions between Murray & Roberts and key shareholders of Aveng regarding the potential transaction began in December 2017. Thus evaluation of this was underway prior to the receipt by Murray & Roberts of a firm intention letter from ATON in March 2018 and the subsequent making of a general tender offer directly to Murray & Roberts shareholders by ATON in April 2018.
M&R said in a statement it is a multinational engineering and construction group with a focus on the natural resources market, specifically the mining, oil & gas and power & water sectors primarily in the Southern Africa, North America and Australasia regions.
“Aveng’s Australian based business, McConnell Dowell, is a major engineering, construction, and maintenance contractor, focused on the building, infrastructure and oil & gas sectors in Australia, New Zealand and Pacific Islands, Southeast Asia, and the Middle East. Aveng’s Mining business, Moolmans, is one of the largest surface mining contractors in Africa, involved in all aspects across the mining value chain.”
M&R says it believes that the combination would give rise to the following benefits, among others, for both companies’ shareholders:
- value creation by combining and integrating Aveng’s Moolmans and McConnell Dowell businesses with Murray & Roberts’ Underground Mining and Oil & Gas platforms;
- the creation of a large multinational engineering and construction business, with the accompanying benefits of additional scale in Murray & Roberts’ key markets;
- enhanced credit profile for the combined business, assisting Aveng to shore up liquidity in the near term; and
- allow time for the systematic sale of Aveng’s non-core assets (which all the businesses in Aveng other than Moolmans and McConnell Dowell) over time in order to maximise value for shareholders.
Aveng shareholders will meet on May 29 to consider matters related to the capital raising and M&R take-over.
M&R’s share price had dropped by 2.53% to R15:00 45 minutes after the announcement was made, while Aveng’s share price increased by 9.89% to R1.00.