Sale of M&R stake in Gautrain operator faces some opposition

It appears there is opposition to JSE-listed Murray & Roberts’s proposed sale of its 50% shareholding in the Bombela Concession Company (BCC), the operator of the Gautrain, for R1.386 billion.

The multinational specialist engineering and contracting group announced on Monday the adjournment of the general meeting at which shareholders were to vote on the proposed transaction.

It said: “In order to allow the board of directors and management to conclude discussions with key stakeholders regarding the disposal by Murray & Roberts Limited of its entire direct and indirect shareholding in Bombela Concession Company … the general meeting was adjourned and will be reconvened on Monday, 20 February 2023 at 11:00 … the minimum period as prescribed by the Companies Act.”

Read: M&R agrees to sell its stake in Gautrain’s operating company, for R1.4bn

M&R Group investor and media executive Ed Jardim on Monday declined to comment on whether there is opposition to the sale, and stressed that opposition is “only implicit in the vote”.

Questions

Jardim also declined to identify the key stakeholders with whom M&R’s board of directors and management need to conclude discussions, if the Public Investment Corporation (PIC) is one of these key stakeholders, and whether the PIC is opposed to the transaction.

“I cannot comment as to the identity of the stakeholders. The percentage vote we require is 50% plus in favour of the resolutions at the meeting [for the transaction to proceed],” he said.

Jardim confirmed that the PIC has a shareholding of about 10% in M&R.

PIC spokesperson Adrian Lackay confirmed this, but was guarded in his comments about the PIC’s stance towards the proposed transaction.

“The PIC is mindful not to make comments that are price-sensitive, except to say it will make a considered decision on the matter, if and when clarity is given to the market in this regard.”

The proceeds from the proposed transaction will be used by M&R to reduce debt in South Africa and assist the group in addressing its working capital needs.

‘Surprising’

Analyst Rowan Goeller from Chronux Research agrees that the reason for the adjournment of the meeting would be opposition to the proposed transaction – but is surprised that there might be opposition to it.

“They shouldn’t necessarily see any opposition to it because it makes sense to M&R in their current situation – the terms and the short lifespan of the concession mean that getting the full value for it now is as good as getting the full value at the end of its life.

“There is no difference. It’s probably better for M&R to get the cash now,” said Goeller.

He added that there is considerable interest in M&R’s shareholding in the BCC, and not just from a single entity.

He said the price M&R is getting is based on competitive bids and the number is right for the concession company.

“M&R is getting the cash now and, given their situation post Australia, it makes sense to have that cash right now as opposed to waiting three years for that cash.”

Agreement with Intertoll 

M&R announced in December that it had entered into a sale and disposal agreement with Netherlands-based Intertoll for its shareholding in the Bombela Concession Company.

Intertoll is a leading European investor in motorway concessions and an independent toll and motorway infrastructure designer and developer, concessionaire, equipment supplier, asset manager and provider of specialist consultancy services catering to the transportation and infrastructure sectors in Europe.

M&R said at the time the purchase price payable for the BCC shares had been determined and agreed with reference to the fair value of these shares of R1.36 billion at 30 September 2022, following receipt of a dividend of R130 million and a fair value adjustment in the three-month period to that date.

The proposed BCC sale and disposal agreement followed M&R announcing in November 2022 that it intended to dispose of 100% of Clough, its Australian subsidiary and driver of its energy, resources and infrastructure (ERI) platform and most significant group business, to multinational Italian industrial group Webuild.

Read: M&R plans to dispose of Australian subsidiary Clough in R4bn deal

The proposed Clough transaction would have resulted in a financial benefit to M&R of about R4 billion.

However, M&R announced the termination of the proposed disposal of Clough to Webuild about 10 days after reporting on the proposed sale of its shareholding in BCC.

The termination of the proposed disposal of Clough led to M&R placing both Clough and Murray & Roberts Pty Ltd (MRPL), an indirect wholly owned subsidiary of M&R and the group’s holding company in Australia, into voluntary administration.

This also meant M&R is at risk of losing its Australian mining business.

Read:

The group previously disclosed that project cash flows at Clough had been dislodged by Covid-related disruptions and there was a need for additional working capital arising from the margin deterioration on its Traveler project in the US and Waitsia project in Australia.

Shares in M&R rose 1.1% on Monday to close at R2.76 per share.