Had the German investor succeeded in its hostile takeover, it would have robbed the JSE and South Africa of one of its last construction champions. Another major South African company would have been forced off our pension portfolios, and further limited the pool of available investment opportunities on the JSE. Murray & Roberts would now be joining the likes of Illovo Sugar, Pioneer Foods, which is the subject of a takeover by American drinks-maker PepsiCo, and milk producer Clover, also in the last steps of a takeover by an Israeli company.

The independent board of the construction company had opposed to the proposed takeover, and refused to co-operate with the German suitor. The directors did it for a different reason, but I take my hat off to them for frustrating the Germans.

Last week Murray & Roberts announced that Aton’s controversial offer to acquire the 56% of the construction company it did not already own had lapsed at the end of September. Aton said it would not be extending the offer, even though it is opposed to the Competition Commission’s recommendation that the takeover be prohibited on the grounds it would limit competition in the local industry.

The demise of the proposed transaction comes after a long and tortuous journey. Aton had first made its move in March 2018, offering to acquire the company for R15 per share, which Murray & Roberts’ board immediately rejected as too low.

In its attempts to see the backs of the Germans, Murray & Roberts even attempted to buy Aveng, another construction company deep in financial and operational trouble.

Aton’s increased R17 per share offer still failed to win the board’s backing. Murray & Roberts declined to co-operate with Aton, and recommended its investors reject the offer.

This, together with the Competition Commission’s refusal to recommend the deal to the Competition Tribunal, frustrated the Germans into finally abandoning the bid, even though Aton had emerged as Murray & Roberts’ single largest shareholder with 44% of the stock.

This level of shareholding is sufficient to give it all the control it wants over the company. 

While Aton’s bid should be welcomed as a vote of confidence in the capabilities of Murray & Roberts in particular, and in South Africa’s construction industry professionals in general, delisting the company from the JSE would just add to a series of foreign takeovers of local champions that in the long term do not best serve the interests of the country.

The 2016 departure of Illovo Sugar from the local bourse, after a takeover by Associated British Foods. The imminent departures of Clover and Pioneer Foods, the maker of the iconic White Star maize meal, Liquid Fruit juice and Bokomo rusks, are also imminent.

While the cash injection would bring in much needed foreign investment and boosts the local bourse, the benefit is short term as the new owners will expatriate dividends, contributing to weakening the rand in the long term. Most importantly, however, no South African investor will be able to participate or benefit in the future growth of the companies.

Yet the laws of creating and growing wealth demand that an investor hold on to the best investments in order to ensure future growth and income. Selling off such iconic assets robs the local investors of participating in the future growth and income of the company in question.

Sure, Murray & Roberts is only worth about R6 billion on the JSE currently, not a very significant amount relative to what’s left behind on the bourse. Still the company is, and should be, a shining example of our engineering prowess, and the pride and joy of our construction professionals and project managers. It shares that role with the one other construction giant still left on the JSE, Wilson Bayly Holmes -Ovcon (WBHO Ltd).

Our other major construction companies, such as Group Five and Basil Read, have fallen by the wayside, victims to the government’s inability to spend on infrastructure over the past 10 years.

Since August 2002, Murray & Roberts has paid R10.675 per share in dividends. Of course, the majority of these dividends were paid in the fat construction years of the run up to the Soccer World Cup in 2010. But the company has no reason to not repeat this performance and dividend paying streak.

Selling off the company would deprive the local investor community of a similar golden income stream in the future. When the economy turns for the better, the company’s prospects will be even better.

Unlike many of its competitors in the local construction industry, Murray & Roberts has taken steps to shield itself of the vagaries of an economy bereft of any infrastructure investment.

In August the company said its order book had jumped 55% on the previous year, to almost R47 billion, while the near-orders had jumped 82% to R14.4 billion. The company has diversified from major infrastructure building in South Africa to a leader in underground mining in six continents, building oil and gas platforms as well as other power infrastructure building capabilities.

The company that built the iconic Cape Town’s Greenpoint stadium, and Dubai’s Palm Islands, has shifted its focus to building oil and gas drilling platforms off the coast of the United States of America, or building underground railways in Australian mines.

At the R17 per share offer price, Aton was in line to take the company on a forward price: earnings ratio of just 12. A steal at the price.

Murray & Roberts’s board insists fair value is to be found at a price range of R20 – R22 per share.   

But smart investors do not sell good companies, whatever the price.

My attitude to the buyouts of the best of South Africa’s companies, including Pioneer Foods and Clover, and others before them, is that local investors will be best served by partnerships that keep the companies listed and allow local investors to partner in the growth of the companies.

In this regard the AB-InBev merger with SA Breweries is the best example of a deal that best serves all parties. Barclays did the same with its acquisition of a majority stake in Absa Group.

Looking at the performance of Massmart since its takeover by Walmart, one may be tempted to say these kinds of partnerships don’t exactly work. But that would be a huge mistake.

The fault for failure to execute the promised expansion lies with Walmart’s strategy.

These are examples that leave local investors on board to enjoy the ride alongside the foreign investor.

There’s no reason why Aton should not fulfil its desires with Murray & Roberts with its 44% control.