March 26, 2018 / 6:26 AM / 5 months ago

German investor upbeat on South Africa in bid for engineering group

JOHANNESBURG (Reuters) - Germany’s ATON GmbH plans to make a buyout offer for South African engineering and construction company Murray & Roberts (M&R) (MURJ.J), saying its move was a sign of its confidence in the South African economy.

ATON, the investment vehicle of German investor Lutz Helmig, already owns a third of Murray & Roberts, which is attracting new orders after a decade-long slump.

Under the deal announced by both companies on Monday, ATON plans a cash offer price of 15 rand per share - a 56 percent premium to Murray & Roberts closing price last Thursday.

ATON said in a statement it believes that the offer represents “a vote of confidence in the South African economy by a large multinational German investor.”

Companies in South Africa and global investors are banking on new President Cyril Ramaphosa to follow through on promises to kick-start the economy and fight corruption after a stagnant economy and political uncertainty under former president Jacob Zuma, who stepped down last month.

News of the planned buyout sent Murray & Roberts’ share price surging as much as 51 percent on Monday, although the fact it was still trading more than 5 percent below what ATON expects to offer suggested some investors might not expect the deal to go through.

ATON, however, said it has the backing of Murray & Roberts’ third largest shareholder, Allan Gray, representing a stake of about 11 percent, and analysts expected the deal would go through.

The deal values the South African company at nearly $600 million.

Murray & Roberts has transformed itself into an international engineering and construction group focused on the global natural resources sector, but has been under pressure for nearly a decade as its order book has been hit by a weak South African economy and reduced spending by clients in oil, gas and mining industries.

Last month, however, it said interim profits more than doubled on higher earnings from its underground mining activities and the sale of its loss-making Middle East business last year.

On Friday the company said it been awarded new underground mining projects in North America and Australasia worth a combined 3.8 billion rand ($326 million).

Shares in Murray & Roberts were up 47.8 percent at 14.25 rand at 1243 GMT, on track for their biggest daily rise on record.

“The offer will probably be accepted by most of the shareholders especially in this market environment,” said Francesco Tarino, a trader at brokerage house BP Bernstein in Johannesburg.

Still, some shareholders might have a hard time swallowing an offer that is about 20 percent less than what their share price was fetching just over a year ago.

“They are definitely buying this business at a discount. Even when I do my own valuations, Murray & Roberts should actually be trading at probably 19 rand,” said an analyst who did not want to be named.

The offer is subject to regulatory approval and ATON securing acceptances from investors holding at least 50 percent plus one share.

Murray & Roberts said in a separate statement that at the time of the announcement on Monday morning, no offer had been made by ATON.

($1 = 11.6556 rand)

Additional reporting Tiisetso Motsoeneng; Editing by Susan Fenton

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