Takeover war of attrition grinds on at Sika

Urs Burkard, who represents the controlling family group on Sika's board, was frustrated by the AGM once more Keystone

The family owners of Swiss industrial chemical maker Sika traded more blows with the company’s board at the annual general meeting of shareholders. The warring sides have been locked for more than three years in a contentious, and sometimes bizarre, takeover dispute. 

For the third year in a row, Sika restricted AGM voting rights for the Burkard family to 5% when it came to electing directors on Tuesday. The controversial tactic, which was endorsed by a Swiss court in October, once more prevented the election of a takeover friendly board. 

The family descendants of Sika’s founding father hit back in familiar fashion by denying board members any pay for another year and blocking the discharge of most directors. This is on top of outstanding civil lawsuits already laid against some directors. 

The civil war within the company was sparked in 2014 when the Burkard family announced their intention to sell their controlling stake to French conglomerate Saint-Gobain. The Burkards own 16% of the firm’s equity, but 53% of voting rights thanks to the special status of their shares. 

The Sika board opposes the proposed deal, fearing that Saint-Gobain will chop the company up and compromise its culture. 

“We will do everything in our power to ensure that Sika’s success story continues,” Sika chairman Paul Hälg told shareholders at the AGM. “Our actions are designed to preserve Sika’s entrepreneurial freedom and protect shareholders.” 

Speaking out against Hälg and the rest of the Sika board, Urs Burkard, representing the family, said the voting restriction damaged the rights of shareholders and violated the principles of company law in Switzerland. Burkard said the family was “more than ever” determined to sell to Saint-Gobain and took a swipe at “fake news” in the media that has damaged the family’s image. 

Referring to October’s court ruling, Burkard said the company’s board had “won the battle, but would never win the war”. The family has appealed the court verdict. 

The Burkards – represented at the AGM by their holding company Schenker-Winkler Holding (SWH) – rejected the board’s recommendation to raise dividend payments to CHF258.8 million ($257 million), an item on the agenda where they were allowed to utilize their full vote. SWH’s counter-proposal to cap the total dividend pay-out to CHF243.6 million was accepted by the AGM. 

With the Burkards and the company board of directors at stalemate, the future of Sika will have to be decided by the Swiss courts. 

Despite the ongoing takeover tussle, Sika has recorded a stellar performance in the last few years. In 2016, Sika announced record annual sales of CHF5.7 billion (up 5.5% on 2015) and profits of CHF567 million (+22%). The family-owned business said it had already outstripped its 2018 growth targets. 

That performance continued in the first quarter of 2017, with sales rising to a record CHF1.4 billionExternal link.

Sika’s civil war 

The long-running Sika takeover battle first emerged at the tail end of 2014 when the Burkard family announced its intention of selling its controlling stake to Saint-Gobain. While the five family members only hold 16% of the company’s capital, their preferential shares come with 53% of the voting rights. 

The company rejected the takeover bid, saying it would not be in its best strategic interests. Sika’s board is particularly concerned that Saint-Gobain could asset strip some units to absorb into their own similar business lines. 

Saint-Gobain maintains that a merger would benefit both companies and recently extended its offer to buy Burkard shares for CHF2.75 billion until the end of this year – with an option to extend further to the end of 2018. Thanks to a clause in Sika’s articles of association, the French company could buy the controlling stake without having to offer the same terms (an 80% premium) to other shareholders. 

The dispute will probably only be settled by the Swiss courts. An initial round of hearings has largely backed Sika’s board. Most notably, an October court verdict ruled that the Burkards cannot sell their stake to Saint-Gobain – even via SWH – without prior approval of the Sika board. The Burkards have appealed this verdict, which also said Sika is justified in restricting Burkard voting rights at AGMs. 

The legal wrangling could take some years yet to sort out. In the meantime, Sika share prices have been steadily rising throughout the dispute.