June 19, 2018 / 9:41 AM / a month ago

UPDATE 2-South Africa’s Aveng shares leap as M&R moves closer to tie-up

* Resolution backed by 52.06 pct votes

* M&R still needs approval from regulator

* ATON not happy with results

* Aveng shares up 25 pct (Adds details, ATON quote)

By Nqobile Dludla

JOHANNESBURG, June 19 (Reuters) - Shareholders in South Africa’s Murray & Roberts voted on Tuesday for the company to look into a potential tie up with construction rival Aveng, sending Aveng’s shares around 25 percent higher.

The approval eliminates the first hurdle for Murray & Roberts (M&R), bringing it steps closer to making a formal offer to Aveng, which ATON, M&R’s biggest shareholder, is against.

The resolution got the backing of 52.06 percent of votes at M&R’s special shareholder meeting.

“We are obviously very pleased with the way the voting went this morning. It is a demonstration of shareholder democracy,” M&R Chief Executive Henry Laas told the media after the meeting.

Laas added that it had done a lot of work canvassing M&R shareholders before the meeting, with some saying it should pursue the deal.

Shares in Aveng, shot up 25 percent after the announcement, before paring gains to trade 12.50 percent higher to 1.8 rand at 1203 GMT. Shares in M&R were down 2.42 percent to 17.37 rand.

M&R and Aveng announced the potential merger in May, saying it would create scale in M&R’s key markets such as Australasia and Africa, while shoring up liquidity in loss-making Aveng in the near term.

ATON, which holds 44 percent in M&R, had said it will vote against the construction firm’s “poison pill” as it is highly value destructive and will negatively impact M&R’s financial performance.

M&R, a major South African construction and engineering company, has been in tug of war with ATON since March when the German investment house launched a $400 million takeover bid, which M&R rejected as poor value for shareholders.

When M&R first announced the proposed Aveng deal, ATON called it a “frustrating” action according to section 126 of the Companies Act meant to derail its takeover bid.

But Laas said on Tuesday M&R started exploring the potential deal with Aveng in the final quarter of 2017, way before ATON made its offer.

“So it is certainly not a knee-jerk reaction in response to the ATON offer. It is a strategic initiative that we’d like to explore, and the opportunity to explore it was interrupted by the ATON offer,” he said.

Because M&R is being pursued by ATON, it needed to seek approval from its shareholders in terms of section 126 of the Companies Act dealing with frustrating action, which includes buying assets outside the ordinary course of the company’s business.

In a statement, ATON said it believes that the outcome was heavily influenced by a “major conflict of interest” by a large shareholder base in M&R.

“Those shareholders, who are at the same time Aveng bond and shareholders, are seeking to protect their interest in Aveng,” said ATON.

The next step is for the Takeover Regulation Panel to determine independently whether M&R can proceed in exploring the potential transaction with Aveng.

Once approved, the board of M&R will do due diligence and move to finalise the terms of the proposed offer with the board of Aveng and then present a formal offer.

If an offer is made, Laas said it would be made in July and put to shareholders for approval in August. (Additional reporting by Patricia Aruo; Editing by Ed Stoddard and Mark Potter)

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