Sector News

Sika targets up to $1 billion in takeovers a year to quicken growth

June 11, 2018
Chemical Value Chain

Swiss chemicals group Sika could spend up to $1 billion on acquisitions in a year to speed up its growth over the next five years, its chairman Paul Haelg told Reuters on Friday.

The construction chemicals maker was held back from big purchases in the past, Haelg said, a restriction which no longer applied after the Burkard family sold their controlling stake to Saint-Gobain last month.

The final chapter of the bitter divorce from the family will come on Monday, when shareholders vote on changing Sika’s share structure, which is expected to be a formality.

The new arrangement will give Saint-Gobain a 10.75 percent stake in Sika rather than overall control which it had sought.

Sika, which makes chemicals used projects like the Gotthard rail tunnel under the Alps, had missed out on some takeover targets during its battle for independence, Haelg said.

“We will be more dynamic and set a higher priority on acquisitions. We want to be a consolidator in our industry.”

Sika could now spend 300 to 500 million Swiss francs a year on acquisitions, up from 200 million francs previously which was concentrated mainly on smaller, bolt-on deals.

In exceptional cases, it could also spend up to 1 billion francs, with bigger deals likely to come in North America or Asia, Haelg said in an interview at Sika’s offices in Baar.

“Our targets are typically family-owned businesses and owners weren’t willing to sell when there was uncertainty about what will happen to Sika,” he said.

The company will mainly look at targets in Europe, North and South America and Asia in the future, Haelg said, while also continuing to make smaller deals globally.

It will also to aim to accelerate its organic growth in China, India and Brazil, he added.

The 64-year-old Swiss national said the way was now open for faster growth at Sika, which has been fighting Saint-Gobain and the Burkards for the last three-and-a-half years.

Sika will unveil higher sales targets next year to replace the current 2020 goals, which will run for five years. At present it targets annual sales increases of 6 to 8 percent in local currencies and a 14 to 16 percent operating profit margin.

“I am optimistic we will see more dynamic growth than in the past,” Haelg said. “I don’t want to give an exact number, that is something for management, but sales growth higher than 10 percent should be possible.

“I am optimistic we can improve on the margin side as well.”

Analysts have said Sika’s simplified share structure and the absence of an anchor shareholder could make the company a takeover target.

Haelg said Sika’s best defense was its results and its rising share price which would make any attempt expensive.

Sika’s stock has gained 32 percent in the last 12 months, outstripping the Stoxx 600 construction index which has lost 1.2 percent .SXOP

When asked if Sika would still be independent in five years, Haelg said: “Yes, that’s that my goal and that’s why I’m remaining as chairman. We want to remain independent.”

By John Revill

Source: Reuters

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