Commission recommends Tribunal prohibit ATON’s takeover of M&R
The Competition Commission has recommended to the Competition Tribunal that the proposed acquisition of Murray & Roberts (M&R) by ATON be prohibited.
ATON, through Redpath South Africa, provides a range of mining services, including the excavation of vertical or inclined openings from the surface for the conveyance of miners, materials, ventilation and pumped water, and the hoisting of ore and waste rock; operational or maintenance activities; infrastructure development and upgrade; and whole-of-mine operational management, in sub-Saharan Africa.
JSE-listed M&R focuses on delivering sustainable and fit-for-purpose project engineering, procurement, construction, commissioning, operations and maintenance solutions. The company also delivers its capabilities into three global sectors mainly oil and gas; underground mining; and power and water.
The commission found the merging parties to be close competitors and that the transaction would, for both parties, result in the removal of their closest and strongest competitor.
During the investigation of the proposed transaction, the commission received concerns that the proposed transaction would potentially negatively impact on potential competitors.
The concerns were that the merger would potentially create a company with such size and scale that it would have the financial wherewithal to throttle competition.
Further, the merger would create a company that potentially had the financial muscle to buy projects or to discount projects to such an extent that other companies could not compete, the commission said on Friday.
In relation to employment, there has not been any suggestion by either ATON or M&R that there is a likelihood of the current employees of M&R losing their jobs in the foreseeable future.
It has also not been argued that M&R is struggling financially or is facing any commercial or business threats that would endanger jobs in the near future.
“Accordingly, the commitment by ATON in relation to the preservation of jobs after the expiry of the Kusile and Medupi [power station] projects is not tantamount to saving jobs or the creation of new employment opportunities.
“M&R has not indicated any difficulties in retaining its current employees in the future. Even if the commission were to find that there is a chance of M&R not being able to retain employees, the commitment would amount to job preservation, which the commission generally expects from an acquirer who is acquiring another firm with a view of saving it,” the commission stated.
The commission found that the proposed transaction resulted in a substantial lessening of competition and, therefore, recommended that it be prohibited.
ATON in March 2018 announced its intention to acquire the remaining shares in M&R it did not already own and in April 2018 made a firm offer of R15 a share. M&R had argued, at the time, that this undervalued the group, and ATON later raised its offer to M&R shareholders to R17 a share.
When M&R refused to recommend the offer to its shareholders, ATON launched a hostile takeover bid and eventually secured a shareholding of just under 44% in M&R. This triggered a mandatory offer by ATON for M&R’s remaining shares.
ATON has previously indicated that it plans to delist M&R from the JSE if it gains majority ownership of the company.
In a statement on Friday, M&R indicated that the commission had not yet provided the parties with the full reasons for its recommendation. The independent M&R board would, together with its advisers, review the reasons for the recommendation once received and would continue to engage with the regulators as required.
ATON indicated that it too had taken note of the commission's decision and would consider the recommendation and its underlying reasons once available.
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