Swiss Sika Management in Battle with French Giant Saint-Gobain to Prevent Back-Door Takeover

Swiss Sika Management in Battle with French Giant Saint-Gobain to Prevent Back-Door Takeover

The decision in December 2014 by five, fourth-generation family members of the 104 year-old Zurich-based, construction chemicals group Sika AG, to sell their share in the company, has created a feud centred on the Swiss canton of Zug. Almost exactly one-year after the death of Franziska Burkard-Schenker, the granddaughter of the company founder Kaspar Winkler, the five Burkard family members; Urs, Fritz, Gabriella, Monica and Carmita decided, without consulting the directors or other investors, to sell their 16.1% stake in the company. This minor stake had however given the Burkard family 52.4% of Sika’s voting rights. The sale of the family stake to the French construction material giant Saint-Gobain would mean that the multinational corporation would achieve a controlling interest in Sika, without buying any of the other shares.
The 2.75 billion Swiss franc transaction allows the Burkard family to sell its holding at an 80% premium while other shareholders receive nothing. Josep Pujal, an analyst with Kepler Cheuvreux said ‘We struggle to understand the price paid to achieve only 16% of the economic interest in the company’. Jen Jenisch, Sika CEO said in an interview with Bloomberg, ‘Sika’s management is concerned that Saint-Gobain will seek to keep the savings for itself and push costs on to the Swiss rival…Any other industrial player would make a takeover bid for the whole company to be able to really get the synergies properly. You wonder what the point of this is’.
Saint-Gobain has made clear that it had no intention of making a full acquisition of Sika and estimates that the synergies generated by the deal would create at least 150 to 180 million euros a year, ‘It’s going to be win-win for Sika’ said Saint-Gobain CEO Pierre-Andre de Chalendar.

Saint-Gobain is one of the oldest industrial conglomerates in the world; it celebrates its 350th anniversary this year, having been founded in 1665 during the reign of Louis XIV. It was the royal manufacturer of mirror glass and remains an important glass producer. One car windscreen out of two in Europe comes out of the groups’ factories although it has today diversified into producing a wide range of construction materials. The group has 181,000 employees, is present in 64 countries and has a turnover of 41 billion euros.

Saint Gobain 350 yrs Photo G  WaghornAt a stormy shareholder meeting in Baar, canton Zug in April, Sika management reduced the family voting rights from 52% to 5% in an attempt to stop Saint-Gobain from getting control. Urs Burkard said ‘The audacity to limit our voting rights is unacceptable in a country like Switzerland’. He 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.

Dominique Biedermann of Ethos, a Swiss investment fund, known for challenging overinflated executive bonuses responded, ‘Your conduct has been irresponsible and not in keeping with the Swiss tradition of socially-responsible entrepreneurs…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.’

One online Swiss news website waded into the dispute running an article under the title ‘The horribly greedy Burkard family’ and claimed that the five family members already received 20 million Swiss francs a year.

Schenker-Winkler Holding AG, the investment vehicle of the Burkard family went to court to get the voting rights reinstated but on 10th June, the Burkards lost an appeal meaning that the family cannot simply remove the board members blocking the move. It is assumed that SWH will appeal against this decision in the Supreme Court and as analyst Torsten Wyss of UBS AG said, ‘getting a final legal decision by the Supreme Court typically takes one to three years in our view’.

In late June, a press release revealed that SWH was now only demanding the removal of one independent board member, Daniel Sauter (58), chairman of Swiss private bank Julius Baer group, at an extraordinary shareholders meeting planned for 24th July 2015. Sauter is perceived as being the most vehemently opposed board member to last December’s agreement with Saint-Gobain.
SWH had originally requested the removal of three board members, including Chairman Paul Hälg
who was to be replaced with the family lawyer, Max Roesle, who would have supported the sale of
the Burkard stake.

Saint Gobain Headquarters Photo G WaghornAccording to Saint-Gobain, ‘the delaying tactics of certain Sika Board members with the sole intention of deferring the closing of the transaction can only have negative consequences for all Sika stakeholders: delay in the implementation of the industrial logic, thus postponing the value creation for all shareholders; prolonged insecurity for the managers and the employees; extended uncertainties for customers and suppliers’. Sika management has said that it has the support of more than 50% of investors including the Bill & Melinda Gates Foundation Trust; Fidelity Worldwide Investment and Threadneedle Investments who claim the deal makes no strategic sense.

Saint-Gobain is geared up for a prolonged battle and CEO de Chalendar has agreed to extend the share purchase agreement to June 2016, saying that he was certain that the deal will get done. ‘The family who owns Sika has been deprived of its rights…when they recover their rights, we’ll buy their stake…it’s just going to take a little bit’ said de Chalendar.
Saint-Gobain has also confirmed that it will not be selling its mortar business to Sika, a source of market conflict between the two companies as Sika supplies additives for concrete and cement.
The Egyptian billionaire, Nassef Sawiris, entered the fray last Wednesday by snapping up a 3% stake in Sika. He backs Sika in the battle against Saint-Gobain. Sawiris is also French cement makers Lafarge’s second biggest shareholder with a 16% stake. Forbes estimates his net worth as 5.8 billion dollars making him the 225th richest person in the world. The cement makers Lafarge SA and Holcim Ltd are currently in the process of a merger in order to adapt to a market in overcapacity against a background of poor demand in the European construction market.


Report and photos: Graham Waghorn