Saint-Gobain, the French building materials company, has given up its fight for control of Swiss rival Sika in return for a pay-off, ending one of Europe’s most contentious takeover battles.
Under the multi-phase plan, first reported in the Financial Times on Thursday, Saint-Gobain confirmed it will still acquire a stake belonging to heirs of Sika’s founder for SFr3.2bn, giving it a roughly 17 per cent stake in the company and 52 per cent of its voting rights.
The price is SFr500m above what was offered to the Sika heirs for their stake in 2014, said a statement from Saint Gobain. The premium takes into account the increase in Sika’s value since the approach was first made.
However, Saint-Gobain will then sell a 7 per cent stake back to Sika and has made a commitment to retire the outsized voting rights in the company at an extraordinary shareholder meeting.
Sika will pay Saint-Gobain just over SFr2bn to cover the cost of the shares and to reflect the change to one share, one vote and the normalisation of certain corporate governance standards. That price is a SFr795m premium market value on May 4, according to the companies.
The agreement will allow Saint-Gobain to make a profit on the deal while retaining 10.75 per cent of Sika shares. The companies have agreed a two-year lock-up and some stand-still obligations - Saint-Gobain’s stake in Sika will remain at up to 10.75 per cent for four years and up to 12.875 per cent for the following two years. And, in the case of an intended sale, these shares will first be offered to Sika up to 10.75 per cent.
The deal also allows the Burkard family, who are the heirs to Sika founder Kaspar Winkler, to exit the company. Urs Burkard, a fourth generation family member, said: “The primary concern of the family has always been to ensure Sika's success and long-term prosperity.”
Paul Hälg, Sika’s chairman, expressed relief at a “positive outcome”.
Guillaume Texier, Saint Gobain CFO commented:
I think it's a good deal for Saint-Gobain. There was a limited window of opportunity to put an end to the uncertainty. From our point of view, this deal meets at least three very important conditions. One, it creates value for Saint-Gobain. Second, it puts an an end to all of this uncertainty. That's what this does as all litigation is finished. And last, it's strategically important as we have 10 per cent of a great company, Sika.
Yes, it was a difficult deal to put together. We wanted all parties in the deal and we wanted all litigation to stop. Doing the deal with two parties is easy, three parties is harder…It was relatively long. I wouldn't say it was painful, but it was work certainly."
The fight for Sika, a chemicals group based in Zug, kicked off in 2014 when Saint-Gobain, its much larger rival, agreed to buy a controlling stake held by the Burkard family for SFr2.75bn. The heirs owned 16 per cent of the company through shares with super-size voting rights, plus 1 per cent through normal shares.
The agreement was designed to allow Saint-Gobain to secure control without having to make an offer to acquire the remainder of the company’s shares. However, it led to fierce protests from other shareholders, including the Bill & Melinda Gates Foundation, which accused Saint-Gobain of flouting corporate governance standards.
Sika’s directors, backed by managers and employees, blocked the sale, which has been tied up in legal action ever since. In October 2016, a Swiss court agreed Sika was entitled to stop the family from selling, and the outcome of an appeal is expected this month.
The family’s agreement with Saint-Gobain was due to expire at the end of this year, after which it would have had to be renegotiated. Saint-Gobain has been criticised by bankers and analysts for spending so long fighting for Sika, when it could have been pursuing other takeover targets.
However, Sika’s share price has almost doubled since the 2014 bid, allowing Saint-Gobain to lock in a significant capital gain.
"We were able to have two sides of our brain working – one side working on Sika and the other side working on the strategy of Saint Gobain,” Mr Texier said.
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