(Bloomberg) – Germany’s Helmig family made an unsolicited bid for Murray & Roberts Holdings Ltd. that values the South African engineering and construction company at about 6.7 billion rand ($574 million), almost two years after talks collapsed for a transaction between the two.
Shares of the Johannesburg-based company rose by a record after the 15-rand-a-share offer from the family’s investment firm, Aton GmbH. The offer is 56 percent above Friday’s closing price.
Aton has agreed to buy about 13.7 million shares, increasing its stake to 33.1 percent, and will begin an offer to buy the remaining shares at 15 rand each, Murray & Roberts said in a statement Monday. Fund manager Allan Gray Proprietary Ltd. has committed to sell its 10.9 percent holding to the bidder. The board of Murray & Roberts will review the offer, the company said. The Public Investment Corp., a manager of South African state-worker pensions, owns 12.6 percent of Murray & Roberts.
“The best interests of all our stakeholders will remain at the forefront of our minds,” Murray & Roberts Chief Executive Henry Laas said in an emailed statement. Aton, which has investments in mining, engineering, aviation and health technology, is making a second attempt at a deal. Talks broke down in April 2016 about a merger of the South African company’s underground mining business and a business owned by Aton. The German company raised its holding in Murray & Roberts to about 30 percent last year.
‘Illiquid Environment’
Aton’s efforts to build a controlling stake were “a pre-requisite of any potential transaction,” the Munich-based company said in a statement. The offer affords Murray & Roberts shareholders with an opportunity to divest of their holdings “in an otherwise illiquid market environment,” Aton said.
Murray & Roberts shares advanced 48 percent to 14.30 rand at 12:16 p.m. in Johannesburg. The company went through a transformation in 2016 when it sold its building and infrastructure units to focus on international businesses specializing in underground mining, oil and gas, and power and water projects.
“Aton believes the premium represented by the offer price, and the opportunity to realize value in cash, is also attractive given the uncertain market outlook in M&R’s key sectors,” it said. “This uncertainty is also reflected in M&R’s order book, which has declined in each of the financial years since 2015.”
‘Elements of Stress’
While there “have been elements of stress in these markets for a very substantial period of time already, we are now getting to the trough because of the improvement in commodity prices globally,” said Marc Ter Mors, the head of equity research at Johannesburg-based SBG Securities, which sees fair value for Murray & Roberts shares at between 18 to 20 rand apiece.
“What we’ve seen already is a sharp recovery in commodity mining capital-expenditure spend and we are still anticipating the oil and gas cycle to start recovering over the next 12 to 24 months,” he said. “We therefore feel that it would be an inappropriate time for minorities to consider the offer of 15 rand that’s on the table. Our valuation of 19.80 rand per share doesn’t consider a potential control premium that normally a company would pay to obtain control of a listed entity.”
Murray & Roberts is also pursuing the potential recovery of funds against sizable client claims in the Middle East in the next 12 months, which may lead to cash inflows in the short-term, Ter Mors said.
“Our view is that Aton was mainly interested in combining the underground mining assets of Murray & Roberts with Redpath Mining, which it already owns, and that Aton may be interested over time in selling the other assets within Murray & Roberts to other parties.”
