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(Bloomberg) -- When the Burkard family ended a century-old relationship with Sika AG by agreeing to sell a vote-heavy $3-billion stake in the Swiss adhesives company, alarm bells started to ring across Europe’s investment community, according to a Threadneedle Investments executive.
The Burkards hashed out the 80 percent premium deal with Cie. de Saint-Gobain SA, without telling management. The 16 percent stake, which carries a majority vote, has an historic opt-out clause so the French company doesn’t have to make an offer for all of Sika.
The deal, and a resulting legal battle, has led investors to rescreen other holdings for similar risks, according to Iain Richards, head of governance and responsible investment at Threadneedle, one of Sika’s disgruntled investors.
“This incredible situation has sent ripples through the investment community and the whole issue of control and voting distortions across Europe is firmly back on the investor agenda now,” Richards said in an interview.
Anomalies in shareholder rights crop up throughout Europe’s corporate landscape in various forms, with 44 companies having opt-out clauses similar to Sika’s in Switzerland alone, according Ethos Foundation, which represents 180 Swiss pension funds. In some cases, the clauses were used by founders to retain influence over their business when selling shares on a stock exchange.
Distortions can take the form of poison pills or the intervention of the state as a shareholder. Merck KGaA, Henkel AG and listed German soccer team Borussia Dortmund all have legal structures that offer some shareholders more say than normal. In Sweden, wireless network maker Ericsson AB and Investor AB, the Wallenberg family’s holding vehicle, are among companies that offer some shareholders voting premium.
The fallout from the Sika situation has resulted in a legal dispute between the Burkards and management, together with minority holders. Sika’s shares are down about 18 percent since Dec. 5, before the deal was announced by Saint-Gobain and the Burkards.
Threadneedle joined forces with Cascade Investment LLC, the Bill & Melinda Gates Foundation and Fidelity Worldwide Investment to block the sale, increasing the likelihood of a long legal battle. Jupiter Asset Management has also spoken out, with Sika claiming 40 percent support among minority investors for the stance taken by Chief Executive Officer Jan Jenisch and Chairman Paul Haelg in resisting the takeover.
“You can see from the market’s reaction when the deal was announced how totally unexpected this was, catching everyone off guard,” said Richards. “We are talking here about one of the jewels in the Swiss corporate crown.”
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