German investment company ATON says JSE-listed Murray & Roberts (M&R) has initiated another ‘frustrating action’ against its offer to acquire all shares in M&R, by trying to prevent ATON from exercising its full rights and voting against M&R’s proposed combination with construction giant Aveng.

In this regard, M&R has filed an urgent application before the Competition Tribunal to prevent ATON from exercising its full voting rights in M&R, which now stands at about 44.06%, owing to ATON’s holding of about 43.8% of the issued shares in M&R.

This follows after ATON increased its shareholding to 39.8% in April, and further to 43.8% in May.

ATON initially offered M&R shareholders R15 a share, which the M&R independent board, some shareholders and an independent review rejected.

The offer price has recently increased to R17 a share.

M&R alleges that if ATON votes its full shares during the meeting to vote on the Aveng transaction, it will be pre-implementing its proposed offer before approval by the competition authorities is granted.

M&R has argued that ATON should only be entitled to vote the 29.99% of M&R shares it held on March 22, when it launched its offer to M&R shareholders.

ATON, however, disagrees with M&R’s claims and intends to oppose the application.

“ATON has duly filed its application for its proposed offer with the Competition Commission and remains committed to complying with all aspects of legislation – specifically the provisions of the Competition Act,” it stated on Friday.

M&R explains that ATON was and is not precluded from acquiring and voting shares in M&R as it does not have control over M&R; the attendance at M&R’s last general meeting in November last year was more than 90% of the issued share capital. Since then the ownership composition of M&R’s shareholder base has increased in concentration and thus the attendance level is likely to increase.

Given this, while ATON is M&R’s largest shareholder, it would not have the majority of M&R shares in a general meeting.

ATON has no intention of pre-implementing a notifiable merger and is of the view that the application made by M&R is “unnecessary and without merit”.

ATON further said, in anticipation of the M&R shareholders meeting on June 19 where shareholders are expected to vote on the proposed merger with Aveng, that legally, M&R requires the approval of shareholders and of the Takeover Regulation Panel to proceed with the Aveng transaction which, in ATON’s view, is a “clear poison pill” directed against ATON’s offer.

M&R shareholders have been asked to consider a resolution to whitewash M&R’s frustrating actions to approve the Aveng transaction.

ATON reiterated that it remains steadfastly against the Aveng transaction as it would introduce significant risk to M&R and its shareholders.

ATON previously raised concern over the transaction, stating that it directly conflicts with M&R’s strategy, which has been to exit the infrastructure and building sector and to exit manufacturing.

The potential Aveng transaction is in conflict with this as it would see M&R acquire Grinaker-LTA’s heavily lossmaking business; McConnell Dowell’s losses that necessitated recapitalisation; Aveng’s lossmaking manufacturing divison; and Aveng’s lossmaking steel division, ATON pointed out.

ATON continued to explain its concern by saying that the Aveng transaction would impose unpredictable risk to M&R owing to a heightened debt burden, assumption of businesses that incurred R6.7-billion of losses in the 2017 financial year, and the failure on Aveng’s part to restructure its activities, which would distract M&R from sound growth opportunities.

“Additionally M&R is unable or unwilling to disclose the possible impact of the Aveng transaction. Therefore, there is no basis for the proposed general meeting in relation to the potential transaction at this stage, neither will the proposed transaction be supported by ATON,” ATON previously stated. 

On Thursday, ahead of the release of news of the latest defensive move by M&R, the M&R share price closed 2.06% lower at R17.63. This is just 63c above the recently revised offer from ATON.