Hostilities in the controversial takeover bid of Sika will resume in the public glare on July 24 with both sides keen to strike a blow at the company’s scheduled Extraordinary General Meeting (EGM) of shareholders.
The five Burkard family members, who want to sell their 16% capital stake to Saint-Gobain along with the 53% of votes that come with the shares, are bidding to remove a Sika boardroom member. The company will not yet reveal whether it intends to limit the Burkard vote – exercised by Schenker-Winkler Holding (SWH) – as it did during April’s AGM.
The EGM promises to be another antagonistic affair as each side continues to battle for control of the boardroom – an essential component to making or breaking the proposed Saint-Gobain sale.
The company’s articles of association would allow the Burkards to sell their stake to the French conglomerate at a premium price of CHF2.7 billion ($2.9 billion) without offering the same deal to other shareholders.
But crucially, another article gives the board the right to veto the sale of blocks of shares worth more than 5% of the total company shareholding. In essence, the Burkards’ proposed sale to Saint-Gobain is unrealistic unless the transaction has the board’s blessing.
With this in mind, SWH sought to remove dissenting board members – including chairman Paul Hälg – at the company’s AGM in April. But Sika fought back by restricting SWH votes from 53% to 5% on the grounds that they had forged an alliance with Saint-Gobain.
In retaliation, SWH fired off a number of legal writs and demanded an EGM to question the validity of the AGM boardroom vote.
SWH had initially called for the EGM to revoke the election of Hälg and board members Monika Ribar and Daniel Sauter at the firm’s AGM on the grounds that its vote had been wrongly restricted. But it now only wants to see Sauter removed.
SWH’s strategy change is designed to pick off dissenting board members one by one, thus reducing the risk of its voting powers being clipped again.
“Sika’s goal in restricting SWH votes [for the selection of board members during April’s AGM] was to maintain a majority on the board that opposes the Saint-Gobain deal,” a SWH spokesman told swissinfo.ch. “If only one person is removed then they will still have that majority, so we calculate that we will have full voting rights at the EGM.”
“We will make a decision on SWH’s voting rights nearer to the date,” Hälg told swissinfo.ch.
Given the chaotic swirl of activity surrounding Sika in recent months, it is little surprise that the EGM itself is not a certainty. A Sika shareholder has lodged a legal objection with a Zug Justice of the Peace, complaining that shareholders’ meeting should not take place at all.
Courts in action
But the eventual fate of Sika will most likely be decided by Switzerland’s higher courts – a legal process that could take around two year.
Having failed to convince two Zug cantonal courts to stop Sika from restricting its voting powers at the AGM, the Burkard family investment vehicle then filed another challenge to the boardroom vote after the shareholders’ meeting.
That case will be heard next year and an initial ruling could be delivered before Saint-Gobain’s offer to buy the Burkard stake expires in June 2016. The court will decide on the technical, although fundamental, issue of whether Sika’s board can veto the indirect sale of large blocks of shares – in other words, from the Burkards to Saint-Gobain via SWH.
At an investors’ meeting in Zurich on Wednesday, Sika’s current board said the Zug court’s refusal to back SWH on voting rights restrictions had given them cause for optimism. In addition, another sizeable shareholder has joined their side in the fight against the Burkard sale.
It was announced on Wednesday that US investment fund Southeastern Asset Management has acquired a 3% stake in the industrial company, and opposes the Saint-Gobain deal as it stands.
Southeastern joins Cascade Investment, which represents the Bill & Melinda Gates Foundation, Threadneedle Investments and Fidelity Worldwide Investment in opposing the current proposed sale.
“With so many large shareholders opposed to the proposed transaction there seems less chance that it can proceed in its present form,” Hälg told swissinfo.ch.
Who makes the first move?
The Sika board has made public three alternative solutions, but has not formally presented them to the Burkards because of the impending litigation.
The first alternative is Saint-Gobain offering the same purchase offer to all shareholders. The second involves Sika taking over Saint-Gobain’s mortar unit Weber, which is a direct competitor of Sika. The third is for Sika to buy the Burkard family shares.
“I am surprised that the Burkards do not want to meet us to discuss these alternatives,” Hälg told swissinfo.ch.
But SWH complains that it is the Sika board that has proven intransigent in the issue. It hopes the EGM on July 24 can poke Hälg and his board members into a more open attitude by removing Daniel Sauter from the mix.
“Sauter is the most rigorous opponent to the transaction,” an SWH spokesman told swissinfo.ch. “If we can remove this one person who we just cannot talk to then it might provide a more conducive atmosphere for the two sides to get together.”
Sika legal dispute
The controversial proposed sale of Burkard family shares to Saint-Gobain was announced in December. The Sika board objected on the grounds that they were not consulted about the deal and because it believes it lacks industrial logic.
Sika’s decision to cut SWH votes at the company’s AGM sparked a legal injunction bid by SWH in the Zug cantonal court (where Sika has its HQ). This was dismissed, but SWH lodged an appeal with the Zug Supreme Court after the AGM – this too was rejected.
On May 22, SWH filed another legal complaint in Zug asking for the court to rule the AGM vote invalid on the grounds that its vote was restricted. This case will be heard in the first instance next year, but could drag on another year if appeals are lodged. This hearing will determine whether Sika’s board can veto the indirect transfer of large blocks of shares.
SWH has also issued writs against some board members, suing them for using company funds to support their objections to the takeover bid.
The Bill & Melinda Gates Foundation, via Cascade Investments, is attempting to have the opting out clause scrubbed from Sika’s articles of association. This allows the Burkards to sell their majority voting stake without Saint-Gobain having to offer the same terms to all shareholders. The Swiss Takeover Board and the financial regulator have both rejected this appeal and it has now gone on to the Federal Administrative Court.
A Sika shareholder has complained to a Zug Justice of the Peace that the company’s EGM should not take place on July 24. He argues that SWH should not have been granted full voting rights when the issue was approved at the company’s AGM.
By Matthew Allen