A majority of 52.06% of Murray & Roberts (M&R) shareholders on Tuesday morning gave the green light for the company’s board to pursue the merger with embattled competitor Aveng.
This came despite strong opposition from M&R’s suitor and 44% shareholder, the German group ATON.
M&R CEO Henry Laas emphasised that the shareholders have not yet approved the actual merger with Aveng, but merely gave the board the mandate to continue developing the deal it started investigating in the last quarter of 2017.
At the start of the meeting Sean Chilvers, representing ATON, repeated the group’s position that the Aveng deal would only benefit Aveng’s bond holders and holds considerable risk for M&R shareholders.
Chilvers said the transaction would expose M&R to debt and could result in a high risk of near-term capital rising.
He said it was a reversal of M&R’s strategy to exit the local construction market and there was no guarantee that M&R would be successful in selling assets like the local construction business Grinaker LTA, since Aveng has been unable to do so.
After the meeting, Laas welcomed the exercise of shareholder democracy. He said the vote was necessary in terms of provisions of the Companies Act that apply in the light of ATON’s offer to take over all the shares in M&R. He said the Aveng transaction was in the making before ATON made its move and would only amount to frustrating action, as ATON accused M&R of, in the absence of approval of shareholders and the Take-Over Regulation Panel (TRP).
He said this vote by shareholders was the first step to comply with the provisions and the next would be to get the approval of the TRP.
Laas said M&R had already started with the due diligence process to determine whether it would proceed with the Aveng deal.
He said M&R was interested in Aveng’s opencast mining business Moolmans, which is successful and the biggest of its kind on the continent. It would fit in well with M&R’s underground mining business, he said.
The other jewel in Aveng’s crown that M&R is after is the Australian business McConnell Dowell, which would fit in well with its own Australian business Glough. McConnell Dowell has an infrastructure capacity which would position it well for the huge infrastructure spend the Australian government is embarking on, he said.
Laas said M&R would not try to sell the balance of the Aveng business at net book value and therefore he does not foresee problems with disposing of it.
Laas said if the Aveng transaction was successful, it would position M&R as a $1 billion market cap company, which is required to really see good multiples on earnings in the share price.
If all goes according to plan, M&R hopes to table a proposed offer to shareholders by the end of August.
After the meeting, ATON said in a statement: “In today’s vote, the majority of shareholders voted to permit M&R to proceed with the Aveng transaction. ATON believes that the outcome of the vote was heavily influenced by a major conflict of interest by a large shareholder base in M&R. Those shareholders, who are at the same time Aveng bond and shareholders, are seeking to protect their interest in Aveng. ATON is still of the view that the proposed transaction with Aveng is a U-turn in M&R’s stated strategy is highly value destructive will negatively impact M&R’s financial performance and situation has no benefits for shareholders of M&R.”