Saint-Gobain Bid for Sika Dealt a Fresh Blow by Court Ruling

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Sika products on the shelf
by Andrew Noel

Cie. de Saint-Gobain SA, the French building materials maker battling in courts to acquire Sika AG, saw the likelihood of a quick resolution to the spat fade and replaced by the prospect of a years-long legal dispute.

Saint-Gobain hit a new roadblock to its plan to buy a 16 percent stake with majority voting rights for $2.7 billion from Sika’s founding Burkard family, custodians of the Swiss chemicals maker for more than a century. The Burkards lost an appeal to overturn a move by Sika to restrict their voting rights, meaning the family can’t simply oust executives blocking the deal.

The decision by descendants of Sika founder Kasper Winkler to exit, through their investment vehicle Schenker-Winkler Holding, has led to a deepening battle inside courtrooms. It’s taken 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. The other investors think they are being left out of the deal.

“We assume that SWH will again appeal against this decision with the Supreme Court, i.e. the last legal instance,” Torsten Wyss, an analyst at UBS AG, said in a note Friday. “Getting a final legal decision by the Supreme Court typically takes one to three years in our view.”

Sika shares rose as much as 2.5 percent in Zurich, and traded 2.4 percent higher at 3,209 francs as of 1:48 p.m. Saint-Gobain fell 1.8 percent to 41.03 euros.

Status Quo

A ruling against Sika would have paved the way for the Burkards and Saint-Gobain to change the board at a scheduled extraordinary shareholders meeting, called by the family. In that instance, they would have been allowed to use their full voting rights, amounting to 52 percent.

“Without a definite legal decision, the status quo remains,” Vontobel analyst Christian Arnold wrote in a note. “Unfortunate situation and uncertainties remain unchanged.”

While the Burkards stand to get an 80 percent premium for their 16 percent stake in Sika, the Swiss maker of construction products says Saint Gobain is gaining control of the whole company on the cheap due to an opt-out clause that allows the French company to avoid a bid for the entire business.

Saint-Gobain Chief Executive Officer Pierre-Andre de Chalendar said in early December that he hoped “this situation will stabilize in coming weeks.” In May, Chief Financial Officer Laurent Guillot said the company had no intentions to alter deal terms and that “a further delay of the deal is not good for Sika’s employees, not good for Sika’s customers, not good for anybody.”

Had the court sided with Schenker Winkler, the family could have closed the deal with Saint-Gobain before the cantonal court of Zug in a separate ruling decided on the legality of Sika’s moves to restrict the owners’ voting rights.

SWH “couldn’t show in a sufficient and credible way” that through the partial restriction of voting rights it would have a disadvantage which cannot easily be fixed, the court said.

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