Saint-Gobain Rejects Sika Request to Bid For Entire Firm

Cie de Saint-Gobain SA said it has no intention of buying the whole of Sika AG, and will instead stick to plans to acquire a controlling stake in the Swiss adhesives maker from the owning family.

The statement is a setback for Sika’s management which had asked Saint-Gobain to bid for the entire company. Sika has said that the current offer values the family’s holding at an 80 percent premium, while providing no reward for other shareholders.

The dispute shows the conflict that can arise when families control companies with a minority of the shares. The Burkard family, Sika’s owners for 104 years, agreed in December to sell their controlling stake to Saint-Gobain for 2.75 billion Swiss francs ($3.2 billion). The Burkards own 16 percent of Sika’s shares, but hold a class of stock that gives them 52 percent of the voting rights.

Saint-Gobain presented its proposal to Sika’s management and directors in Zurich today, the French company said in a statement. Sika, which this week got support from investors including Bill & Melinda Gates Foundation Trust and Fidelity Worldwide Investment, said today that “Saint-Gobain continues to ignore the detrimental effects of the transaction on Sika and its shareholders.”

Legal Mess

Investors have said that the situation has descended into a legal mess that threatens to disrupt Sika’s business. Sika has fallen 28 percent since the the deal was announced in December.

The current agreement gives Saint-Gobain voting control of Sika and access to the company’s product range, client lists and know-how, Sika Chief Executive Officer Jan Jenisch said in an interview earlier this week. Sika’s management is concerned that Saint-Gobain will seek to keep the savings for itself and push costs on to the Swiss rival, two people familiar with the matter have said.

The French company also said today that it won’t sell its mortar business to Sika. The Swiss rival has said that integrating Saint-Gobain’s mortar business under the Sika “umbrella” could remove key areas of market conflicts.

“It has become abundantly apparent from the analyses made both by Sika and by Saint-Gobain’s management that the tie-up between the two companies will generate annual synergies of at least 150 to 180 million euros,” Saint-Gobain said. “To implement these synergies, there is no need to contribute Saint-Gobain’s mortar business to Sika.”

Opposing Views

Sika today said it doesn’t share the view by Saint-Gobain on possible synergies or any other aspect of the transaction.

For Jenisch, the best outcome would be a bid by Saint Gobain for all of Sika. A full acquisition would offer cost savings, though any bid may be a bit lower than what the Burkard family got, according to Jenisch.

Saint-Gobain proposed that Sika will remain a Swiss company and keep its listing on the Swiss stock exchange once the transaction is complete. The company also said that a new governance structure would guarantee an equal distribution of the synergies between all shareholders.

While the board of directors would include a majority of representatives from Saint-Gobain, it would also feature a “strong representation from independent directors, some of whom will be elected directly by the shareholders holding bearer shares,” the French company said today.

Schenker Winkler Holding AG, an investment company owned by the Burkard family, said in a separate statement that it continues to support the current proposal as Saint-Gobain is the right investor to help developing Sika’s business further.

A shareholder meeting called by the Burkard family and Saint-Gobain to replace directors promises to be the next flash point. The timing of that meeting is unclear because of wrangling over the composition of the board, Sika has said.

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