Sulzer's U.S. Investors Lose Out as Tender Hands Europeans Exit

  • Investors in Europe have until tomorrow to tender shares
  • Price gap could spur investors to sell shares: Vontobel

Sulzer AG’s recent share price drop has handed European investors in the machinery maker a more attractive exit through Russian billionaire Viktor Vekselberg’s tender offer. Their U.S. counterparts don’t have the option.

European investors have until Friday afternoon to cash in on Vekselberg’s offer, which is higher than the current share price. That and the prospect of a shrunken free float is acting as an incentive to sell, analysts said. The tender through the Russian’s Renova Group investment vehicle wasn’t extended to U.S. investors because the legal regulations would be different.

“Traders who buy the stock now and are registered by the close of the offer could make a small profit,” said Fabian Haecki, an analyst at Vontobel. “The price gap will lead many people to tender shares, so Renova’s stake will be quite high after the grace period.”
Shares in the Swiss pump maker slipped 0.6 percent to 94.95 Swiss francs on Thursday, their lowest level since July 27. The fall dangles a premium of 4.25 francs in front of European investors, the biggest since Vekselberg’s Tiwel unit announced the 99.20 franc per share offer on Aug. 3.
A representative for Sulzer wasn’t immediately available.
Risks relating to the financing of the deal as well as anti-trust hurdles may be additional reasons why Sulzer shares have dipped below the offer price, which would usually serve as a floor, analysts said.

During an initial acceptance period, 13.16 percent of shares targeted by the offer were tendered to Tiwel, giving Vekselberg’s Renova Group holding company 42.25 percent of voting rights in Sulzer.

A slump in the oil and gas industry, from which Sulzer derives around half of its revenue, and the resignation of its chief executive officer have helped to make the pumpmaker look less attractive, analysts at Zuercher Kantonalbank said in a note to clients. An increase in Renova’s holding is another factor.

Sulzer said is seeking a CEO after Klaus Stahlmann quit in August. Thomas Dittrich has been appointed on an interim basis. The company said on the same day it has streamlined capacity in Brazil, the U.S. and China and cut jobs.

“When the offer ends, the market for Sulzer shares could be extremely volatile as the freefloat will be much smaller,” Vontobel’s Haecki said.

Before it's here, it's on the Bloomberg Terminal.