The proposed takeover of Swiss chemicals company Sika by French conglomerate Saint-Gobain has been dealt a blow by the election of a board and chairman opposed to the deal at Sika’s annual general meeting on Tuesday.
But the vote was shrouded in controversy as the Burkard family, descendants of Sika’s founder, had their voting rights reduced from 52% to 5% in a controversial decision by the company’s management. The five Burkhard family members want to sell their 16% capital stake, which comes with 52% of voting rights, to Saint-Gobain.
The Burkards’ proposal to replace 2014 chairman Paul Hälg with Max Roesle, who would support the sale of their stake, was rebuffed by other shareholders during a stormy meeting in Baar, canton Zug. Shareholders voted in all board members nominated by the Sika management. But the Burkard family is now bound to challenge the legality of their vote restriction.
The impact of the voting restriction was made abundantly clear when another AGM proposal, which would also have damaged the Burkard sale prospects, was overwhelmingly rejected. On this point, the Burkards, via their shareholding structure Schenker-Winkler Holding (SWH), were allowed to wield their full vote.
The rejected proposal called for the scrapping of an opt-out clause that would allow the Burkards to sell to Saint-Gobain without offering the same deal to other shareholders. The Burkard family also flexed its full voting muscles in rejecting the consultative vote on 2014 compensation and the proposal to pay board members CHF3 million ($3.08 million) in 2015.
However, two proposals from shareholders were accepted, including the Bill & Melinda Gates Foundation's proposal to audit SWH’s past dealings with Saint-Gobain and appoint an expert commission to look into future business conduct of the group.
The meeting was opened by incumbent chairman Paul Hälg. “This is surely the most important AGM in the history of this company,” he said. “At stake is nothing less than the future of Sika and its 17,000 employees.”
Hälg accused the Burkard family, via their shareholding structure Schenker-Winkler Holding (SWH), of wanting to replace him with Max Roesle to “smooth over Sika’s hostile takeover by Saint-Gobain”, a deal he said lacked any “industrial logic”. To protect the company, the management had thus taken the decision to limit the SWH vote for the election of the board.
Urs Burkard, one of the five family members and a board director himself, accused the Sika management of illegally expropriating the family’s rights. “They want to dictate what we can do with our property,” he told shareholders.
He also criticised threats by managers and directors to resign if the Saint-Gobain deal went through. “Who wants to invest in a headless company?” he asked.
Several other speakers took to the stand, accompanied by cheers or boos depending on their stance. Most spoke out against the Burkhard family, including investment fund Ethos.
“Your conduct has been irresponsible and not in keeping with the Swiss tradition of socially-responsible entrepreneurs,” said Ethos chief executive Dominique Biedermann. “Of course we live in a free country where everyone has the right to sell their shares. But if you control a listed company with 16% of the share capital then you bear a responsibility.”
However, not everyone was so supportive of the Sika management. One shareholder accused Hälg of distributing “propaganda” against the Burkhard family. “Paul Hälg is an employee, but he acts like he owns the company,” the shareholder said.
Another stood up to accuse Sika’s managers of violating shareholder rights. “They will not allow a shareholder to vote in order to prevent themselves from being voted out of office,” he said. He added that this could set a dangerous precedent that could damage corporate legal certainty in Switzerland.
The controversial takeover bid was launched when the five Burkard family members announced in December that they would sell their controlling stake to Saint-Gobain. The Sika board and management, together with key shareholding groups, launched a media and legal campaign to block the deal.
The Burkards responded by trying to call an extraordinary general meeting to replace dissenting board members with others more amenable to the sale. Sika refused to call the EGM and reduced the Burkard voting rights, a decision that the Zug courts have temporarily upheld until the AGM is over.
The battle has so far ranged from the courts to the Swiss Takeover Board and the Swiss financial regulator. The AGM will make critical decisions that could affect the proposed takeover, but the argument is sure to continue in further legal tussling.
Having been foiled in their earlier attempt to call an extraordinary general meeting before Tuesday's AGM, the Burkard family has now proposed a shareholder meeting on July 24.