The takeover battle for engineering and construction group Murray & Roberts (M&R) by German investment company ATON intensified this week with ATON announcing its intention to make a new mandatory offer, following a Takeover Special Committee (TSC) ruling instructing ATON to withdraw its earlier voluntary offer.

The family-owned business also confirmed an increase in its cash offer price to R17 a share, from R15 previously. Nevertheless, the M&R independent board continued to argue that the offer “undervalued M&R based on its prospects”.

ATON, which is already M&R’s largest shareholder, with a 43.7% holding, said in a statement that the TSC ruling “substantively upholds” its offer, while improving its quality.

By contrast, M&R’s independent board argued that the TSC ruling vindicated its guidance to shareholders to reject the “opportunistic” offer.

“Ultimately, these actions have forced ATON to issue a new firm intention announcement and, in due course, the new ATON mandatory offer at an increased offer price with reduced conditionality,” the board said in a statement.

The independent board said it would review ATON’s new offer before providing further guidance, but reiterated its stance that a fair-value range for M&R ordinary shares was between R20 to R22 a share. M&R shares traded between R17.00 and R17.20 on Tuesday.

In its statement, ATON insisted that the converted offer provided “even higher certainty of implementation”. It also noted that, at R17 a share, the new offer price represented a 53.8% premium to the 90-day volume weighted average price.

The TSC ruling, ATON added, confirmed its view that the independent board’s rejection of the offer had been made “with undue haste and contravened frustrating action provisions of the Companies Act”.

The TSC ruling, ATON said, dealt with the “frustrating actions” of the M&R independent board and the conduct of CEO Henry Laas, which ATON said had confirmed its concerns. The company noted that Laas had been ordered to refrain from making any public statements regarding or concerning the offer.

“Nevertheless, ATON was and remains open to engage with the independent board.”

In response, the M&R independent board said it was of the view that ATON remained resolved to implement the transaction on a contested basis, noting that ATON had not been “willing to engage” with it following the TSC ruling and ahead of releasing its firm-intention announcement regarding the new mandatory offer.

“This is evidenced by the increased offer price and proposed revised terms for the new ATON mandatory offer, despite ATON being strongly of the view for the past eight weeks that an offer price of R15 per M&R ordinary share represented a full value for the company.”

The TSC ruling and the higher mandatory offer follow on from an announcement by M&R and Aveng that the two companies intended pursuing a combination, whereby M&R would acquire the entire issued share capital of Aveng, while facilitating the early redemption of R2-billion-worth of Aveng convertible bonds.

ATON, which immediately rejected the proposed transaction as a frustrating action, reported that it had received unsolicited inbound enquiries and heightened interest by institutional shareholders in ATON’s offer following M&R’s announcement of its intended acquisition of Aveng.

“As a result ATON has increased its shareholding in M&R to around 44% [and] three of M&R’s larger shareholders have now sold shares to ATON in the context of the offer.”

M&R’s independent board said it was aware of the TSC ruling and revealed that it had sought to engage with ATON prior to the release of their announcement.

“The independent board is encouraged by the TSC’s ruling, the re-issue of the voluntary offer as a mandatory offer and the elimination of the unfair treatment of M&R shareholders. The independent board will study the announcement and provide further guidance to shareholders and the market shortly.”

Meanwhile, in a statement to its shareholders, Aveng said that, despite recent developments, its board remained of the opinion that there was merit in the potential combination of Aveng and M&R.

“The Aveng board is therefore continuing to engage with the M&R board and will continue progressing the M&R transaction.”

Aveng also confirmed that it remained committed to the implementation of a proposed rights offer to meet its interim liquidity requirements.