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Takeover tussle

Sika foils leading shareholder at AGM

By Matthew Allen, Zurich

Sika’s largest shareholder has again been practically frozen out of the company’s annual general meeting by having its vote restricted. As a result, the sale of the Burkard family’s controlling stake to French rival Saint-Gobain was obstructed for a second year running. 

Swiss chemical company Sika has been embroiled in the takeover battle since late 2014 when the Burkards, who are descendants of the firm’s founder, said they would sell their shares. The 16% capital stake comes with 52% of voting rights, controlled by the family’s holding company Schenker-Winkler Holding (SWH).

Sika’s board, allied with major shareholders including the Bill & Melinda Gates Foundation, oppose the sale and have placed obstacles in its path until the Swiss courts can finally rule on the legality of the share transfer (see box below).

One controversial tactic has been to reduce SWH’s 52% voting right to 5% for the election of board members at the last two AGMs. The purpose of this restriction has been to prevent the family (via SWH) from electing a board that would approve the takeover.

Sika chairman Paul Hälg said he was protecting other shareholders from an unwanted takeover until the court ruling. But Urs Burkard, representing the five family members, argued at the AGM that the move was illegal and a violation of their rights.

Thanks to this restriction the AGM re-elected Hälg as chairman. SWH’s nomination of a new board member and its objections to other directors were similarly stymied.

Sika takeover conflict

The five Burkard family members want to sell their controlling stake in Sika to Saint-Gobain for CHF2.7 billion ($2.8 billion). This represents an 80% premium on the share value.

But the company’s statutes forbid the transfer of those shares without approval by the board of directors. The Burkard family argues that the rule does not apply because the shares are held by a holding company, Schenker-Winkler Holding (SWH).

The Swiss courts are currently deliberating whether the Burkards can indirectly transfer the shares via a third party (SWH) without Sika board permission. The ruling is expected this autumn.

But for a second year in a row, the board will not be paid as SWH was free to utilize its full vote to strike down their proposed pay packages at the AGM. The Burkard family is currently suing three board members for allegedly damaging their interests. The AGM refused to discharge six board members, including Hälg, from their duties, which could have a bearing on these legal proceedings.

Hours before the AGM, Saint-Gobain chairman Pierre-André de Chalendar issued an open letter stating that the sale would meet “all the requirements of Swiss law”. Furthermore, he pointed out that the proposed takeover has already been approved by all the relevant global competitions authorities, including those in Switzerland and the European Union.

“We have made some very strong commitments: they include a pledge of no redundancy of Sika employees nor any restructurings due to our acquisition of SWH, a promise to uphold all contractual commitments to employees, and a determination to keep not just the brand but also the headquarters and the stock‐market listing in Switzerland,” he wrote.

Meanwhile, Sika has posted strong first quarter sales growth of 6.6% to a record CHF1.27 billion. The firm forecast sales to continue at a growth rate of 6-8% for the rest of the year. Previously announced full year results for 2015 revealed a 5.4% growth in net profit of CHF465 million.

The company’s board argues that is operating successfully as an independent entity and rejects the premise that Saint-Gobain would increase its performance as a new owner. Furthermore, Sika management has repeatedly voiced concerns that a takeover would present conflicts of interests as both companies operate in the same fields.



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