By John Revill
BAAR, Switzerland-- Sika AG shareholders failed to ratify a
proposal that would have stripped a controversial clause from the
Swiss chemical company's charter, leaving it vulnerable to a
takeover by French conglomerate Saint-Gobain SA.
The proposal, which would have eliminated a clause allowing the
founding family to sell its stake without the deal being extended
to the rest of shareholders, was voted down 69% to 31% at a
marathon, seven-hour-long meeting Tuesday night.
The clause has been the bone of contention in a battle between
Sika's management and both Saint-Gobain and the founding Burkard
family since December. The family is trying to sell its stake,
which represents more than 16% of the company's capital but 52.9%
of its voting rights, to Saint-Gobain for 2.75 billion francs ($2.8
billion) , a roughly 80% premium.
"I would prefer it if it wasn't there," said Sika Chairman Paul
Haelg, referring to the clause.
The battle for Sika has highlighted an unusual provision in
Swiss law: Companies can exempt shareholders from a requirement to
bid for the entirety of a company after securing more than a third
of its stock. The provisions are causing some international fund
managers to reconsider Switzerland, saying opt-out clauses have
made Swiss companies less enticing and contributed to the
underperformance of the stock market.
The benchmark Swiss Market Index has trailed the Stoxx Europe 50
by 10 percentage points over the past 12 months. In addition to
opt-out clauses, Swiss shares have been hit by a strong franc and
slow growth in Europe, a key market.
"If this sale proceeds, it would be a wake-up call for foreign
investors in Switzerland," said Trelawny Williams, head of
corporate finance at Fidelity Worldwide Investment, referring to a
possible takeover of Sika by Saint-Gobain . "Many would have to
rethink about how comfortable they are about investing in Swiss
companies with opt-out clauses. " FWI has a 1.6% stake in Sika.
In addition to Fidelity, Columbia Threadneedle Investments, the
Bill & Melinda Gates Foundation Trust and Cascade Investment
also oppose the takeover.
Nearly a third of Switzerland's 244 listed companies have
adopted opt-out or similar clauses, according to the SIX Group AG
website. Those include well-known firms, such as elevator maker
Schindler Holding AG and luxury watch giant Swatch Group AG, as
well as many family-dominated businesses.
Switzerland began allowing opt-out clauses in 1998 as part of a
move to accommodate family controlled companies that wanted to
maintain the option of selling to buyers who didn't want to make an
offer for the entire company, according to Frank Gerhard, a
corporate lawyer at Homburger AG. But Mr. Gerhard says such clauses
are likely to decline over time as investors put pressure on
companies.
"When you have things like opting out clauses and different
voting stock, it makes it more complex," Mr. Gerhard said.
Investors prefer companies to have simple and easily comparable
capital structures, he said.
In typical Swiss takeovers, a buyer is required to bid for the
entirety of a company after acquiring more than a third. The U.K.,
France and Germany have similar requirements.
Sika dates back to 1910, when the founder, a cobbler's son,
invented an adhesive compound that could be used to waterproof
construction sites. He later successfully commercialized the
product, which was used to protect the nine-mile Gotthard railway
tunnel that runs beneath the Swiss Alps.
Last year, Sika generated revenue of 5.57 billion Swiss francs
($5.71 billion) and net income of 441 million francs. The company
now employs 16,895 people in 91 countries.
Sika adopted its opt-out clause in 1998. Shareholders approved
the proposal because the Burkard family was so closely associated
with the company and had pledged to protect its independence.
Last year, the family decided it was time to sell its stake.
Paris-based Saint-Gobain, a global building materials conglomerate,
was a willing buyer.
Saint-Gobain's agreed to pay a premium of 80% for the family's
stake. Other shareholders, who hold around 83% of the company, were
offered nothing.
"The family deserved the premium because it has taken the full
entrepreneurial risk for more than 100 years," said Urs Burkard, a
member of the founding family. He says the family remains
determined to fulfill its contract with Saint-Gobain.
Other shareholders disagree.
"Such unequal treatment of shareholders is unacceptable," said
Dominique Biedermann, the chief executive of Ethos, an umbrella
organization of pension funds. Ethos members hold nearly 7% of
Sika's shares.
Sika's board and management have fought the takeover, saying it
threatened the future of the company, and are prepared to continue
their opposition.
An extraordinary shareholders meeting to vote on the proposed
sale will be held on July 24. Several court cases and
administrative actions are also pending.
Write to John Revill at john.revill@wsj.com
Access Investor Kit for Sika AG
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=CH0000587979
Subscribe to WSJ: http://online.wsj.com?mod=djnwires