The protracted tussle for control of Murray & Roberts (M&R) took yet another turn this week, after the Takeover Special Committee (TSC) overturned a June decision by the Takeover Regulation Panel (TRP), allowing M&R to continue with preparations for a potential combination with Aveng, despite the existance of a mandatory offer from ATON for all the shares in M&R it did not already own.

The approval was granted by the TRP after M&R shareholders voted on June 19 that M&R’s proposed tie-up with Aveng did not represent a frustrating action in terms of Section 126 of the Companies Act, which prohibits a board of a target company from frustrating a bona fide offer.

ATON, the German investment company which holds around 44% of M&R, argued that the proposed Aveng transaction was nothing more than a “poison pill” designed to thwart its takeover bid. Following the vote, ATON also argued that the outcome had been heavily influenced by a conflict of interest among other minority shareholders, who were either shareholders or bondholders in Aveng.

On June 21 and after a narrow majority of M&R shareholders (52%) voted to approve the Section 126 resolution, the TRP provided its approval for M&R to proceed with preparations for the Aveng transaction. However, ATON subsequently submitted an appeal to the TSC, in which it requesting that the TRP approval be overturned.

In its ruling, dated July 31, the TSC overturned the TRP decision and refused the approval sought by M&R to proceed or continue with the ‘potential Aveng transaction’. The TSC also ordered that M&R bear the costs of the appeal.

The TSC ruled that, in the context of ATON’s hostile offer, the M&R independent board’s proposed Aveng tie-up did constitute a frustrating action and that the TRP had to take both legislation as well as the specific circumstances of the transaction into account when making its determination.

The TSC listed several specific circumstances including the fact that the ATON offer was hostile and was not supported by the independent board, as well as the fact that the board had failed to disclose the proposed Aveng transaction to an earlier TSC convened to adjudicate the fairness of ATON’s initial voluntary offer, which the ‘First TSC’ ordered be withdrawn and made mandatory.

In its July 31 ruling, the TSC reflected that this lack of disclosure to the First TSC came despite the potential Aveng transaction being announced on 18 May 2018, “a mere two days after the conclusion of the First TSC hearing on 16 May 2018 and even before the decision of that committee had been made”.

The ruling also highlighted: the overlap in M&R and Aveng shareholders; the fact that the potential Aveng tie-up had material effects on the nature of M&R and the amount payable by ATON under the mandatory offer; the market uncertainty created by the potential tie-up; and the fact that the proposed Aveng transaction was not a competing offer.

In a note to shareholders, the M&R board said it would review the TSC ruling together with its legal advisers and would also consult with Aveng. “The Board will make a further announcement regarding the proposed transaction in due course.”

In its response, Aveng noted M&R’s intention to further engage with the company, but said no formal correspondence had been received as of Thursday morning.

Aveng told shareholders that it would continue with its capital markets transaction, which included an early redemption of bonds and the disposal of noncore assets and properties.

“As previously communicated, Aveng remains of the view that the implementation of the early bond redemption as soon as practically possible is in the best interest of all stakeholders, should the M&R offer not be made within a reasonable time period.

Aveng confirmed that its had delayed the release its results for the financial year ended June 30, 2018 to September 25, from the scheduled date of August 21 to allow sufficient time to incorporate and report on the effect of the various corporate actions previously announced.

ATON did not comment immediately on the TSC ruling.