Saint-Gobain Can Focus on Sika Battle After Verallia Deal

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Pierre-Andre de Chalendar
Saint-Gobain CEO Pierre-Andre de Chalendar. Photographer: Jasper Juinen/Bloomberg

French building materials company Cie. de Saint-Gobain SA may soon be able to focus all its energy on the battle to take over Swiss chemicals maker Sika AG after moving a step closer to selling glass-packaging unit Verallia.

Saint-Gobain entered exclusive talks with Apollo Global Management LLC to sell the business for 2.95 billion euros ($3.3 billion), the Courbevoie-based company said in a statement Monday. It already sold the North American part of the unit to Ardagh Group SA as Chief Executive Officer Pierre-Andre de Chalendar focuses on the building materials market.

“They are unlocking a bit of hidden value” because the Verallia proceeds are “a bit higher than expected,” Arnaud Palliez, an analyst at Raymond James in Paris, said by phone. “It will free up management resources for Sika, and will help fund the Sika transaction, which is a good thing.”

While the purchase of Sika would be the next step in Saint-Gobain’s transformation, de Chalendar faces a prolonged legal battle to take control of the adhesives maker as its management and some shareholders are resisting the deal.

Saint-Gobain agreed to a transaction with Sika’s founding family in December to buy their 16 percent stake carrying 52 percent of the voting rights for 2.75 billion Swiss francs ($2.9 billion). Sika’s management and smaller investors are opposing the deal, claiming a combination makes no strategic sense and hands the Burkard family an 80 percent premium while other shareholders get nothing.

Deepening Battle

The decision by descendants of Sika founder Kaspar Winkler to exit the business has spawned a deepening battle taking place inside courtrooms and the media. It’s taking an increasingly acrimonious tone, with multiple actions between the family and Saint-Gobain on one side, and Sika management and high profile shareholders including Threadneedle Investments on the other.

Saint-Gobain has prepared for a protracted legal battle, agreeing to extend the share-purchase contract until June 2016. De Chalendar said in an interview this month he is confident the deal will get done.

Verallia, which makes glass bottles and jars, operates 47 plants in 13 countries and last year had sales of 2.4 billion euros. The unit attracted five bids and Apollo’s offer values the business at 7.4 times earnings before interest, taxes, depreciation and amortization. Owens-Illinois Inc., the world’s largest glass-packaging manufacturer, traded at 7 times Ebitda in the last 12 months, according to data compiled by Bloomberg.

Saint-Gobain shares were down 0.1 percent at 42.55 euros as of 2:16 p.m. in Paris, valuing the company at 24 billion euros, while France’s CAC 40 index was down 0.6 percent.

Apollo was advised by Lazard.

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