March 27, 2018 / 12:11 PM / a month ago

South Africa's Murray & Roberts rejects ATON buyout offer

JOHANNESBURG (Reuters) - South Africa’s Murray & Roberts (MURJ.J) on Tuesday rejected German investor ATON’s buyout offer, which values the engineering and construction company at nearly $600 million, as “opportunistic” and poor value for shareholders.

FILE PHOTO - A construction project by Murray & Roberts is seen though a rain covered window in Cape Town in this picture taken August 31, 2015. REUTERS/Mike Hutchings

German investor Lutz Helmig’s ATON, which already owns a third of Murray & Roberts, offered to buy the rest of the company at 15 rand ($1.29) per share — a 56 percent premium to last Thursday’s closing price.

However, Murray & Roberts’ independent board said the offer price, in conjunction with the risks presented in execution, was “particularly unattractive” for its shareholders.

“It is the independent board’s view, therefore, that the proposed cash offer price of 15 rand per ordinary share is opportunistic and materially undervalues Murray & Roberts based on its prospects,” board chairman Suresh Kana said on a conference call.

ATON responded by saying it would wait to hear from shareholders.

“Our offer has been made to shareholders and we believe they should have the opportunity to respond,” ATON said in an emailed response to questions.

Kana said ATON was taking advantage of share price weakness that he attributed to declining valuations of rivals in the construction sector and ATON voting against its share buyback program last year.

The board said it recommended that shareholders reject the offer once it is formally made to them.

Chief Executive Henry Laas, who was also on the call, said the board has engaged with shareholders but does not have a “conclusive position whether they are supportive or not”.

ATON plans to post an offer circular to Murray & Roberts shareholders on April 5, saying it has the backing of the company’s third-largest shareholder, Allan Gray, who holds a stake of about 11 percent.

Shares in Murray & Roberts fell more than 6 percent after the company released its statement but pared losses to close 4.1 percent down at 13.45 rand.

Murray & Roberts is reluctant to sell cheaply, having spent billions of rand transforming itself from a local builder to a multinational focused on the natural resources sector.

“We did say yesterday that the offer was hostile. In simplistic terms, management are looking out for their jobs and do not know what the intent of the foreign buyer is,” said Cratos Wealth equity trader Greg Davies.

ATON, with a diverse portfolio of investments in the mining, engineering, aviation and health technology sectors, is making its second attempt at a deal after a previous approach failed in 2016.

The two parties had discussed numerous possible transaction structures, including the combination of Murray & Roberts’ underground mining business with that of ATON’s Redpath.

ATON could not be reached for comment.

Murray & Roberts says that ATON’s proposals include possible acquisition of the company’s entire issued share capital before delisting the business.

($1 = 11.6668 rand)

    Reporting by Nqobile Dludla; Additional reporting by Patricia Aruo; Editing by James Macharia and David Goodman

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