Swiss specialty chemical company Sika AG’s seven-hour long annual general meeting of shareholders is one for the record books. The Swiss company’s management and several board members are in a standoff with Burkard family-owned Schenker-Winkler Holding (SWH) over the potential sale of SWH to Saint-Gobain, which would give the French conglomerate majority voting rights in Sika. Several key topics regarding this deal were voted on during the meeting.
SWH controls 16.1 percent of Sika’s capital with 52.4 percent in voting rights. The way the deal is set up, Saint-Gobain does not have to reimburse or buy the remaining shares to gain a controlling voting interest in Sika due to an opt-out clause, according to Sika’s investors. This means that the Burkard family, which owns the majority of voting rights in Sika, could sell its stake to Saint-Gobain without the rest of the shareholders benefiting from such a deal. This caused apparent friction between Sika’s board of directors, management and Burkard family shareholders during the meeting.
Sika’s chairman Paul Hälg called the meeting “historic.”
Sika’s board of directors restricted the voting rights of SWH at the meeting to 5 percent for all registered shares “to the extent that such a restriction is necessary to prevent an early change of control to Saint-Gobain,” according to Sika’s statement.
Specifically, SWH’s voting rights were restricted on several agenda items, including:
—Voting on the re-election of Monika Ribar, Paul Hälg (board chairman), Frits van Dijk, Daniel Sauter, Ulrich Suter and Christoph Tobler;
—Voting on the election of Max Roesle;
—Voting on the election of the chairman of the board of directors; and
—Voting on the re-election to the nomination and compensation committee, with the exception of Urs Burkard.
“They want to dictate what we can do with our property,” Urs Burkard told shareholders during the meeting, according to a local report.
In a statement leading up to the meeting, Sika said, “The board of directors supports the re-election of Urs F. Burkard, Jürgen Tinggren and Willy K. Leimer. However, in view of the opposition of SWH to current board members—Monika Ribar, Dr. Paul Hälg (chairman) and Daniel J. Sauter—these members and Frits van Dijk, Ulrich W. Suter and Christoph Tobler will only make themselves available if all are re-elected and Dr. Paul Hälg is confirmed as chairman.”
Commenting on this during the meeting, Urs Burkard asked, “Who wants to invest in a headless company?” according to a report.
“The shareholders re‐elected all board members, including chairman Paul Hälg, for another one-year term,” according to Sika. “Max Roesle, who was proposed as chairman by SWH, was not elected to the board. Frits van Dijk, Urs Burkard and Daniel Sauter were re‐elected to the nomination and compensation committee. Furthermore, the auditors and the independent proxy were re‐elected for another year.”
In a non-binding consultative vote, the shareholders said no to the compensation report for 2014.
“In addition, they did not approve future compensation of the board of directors,” Sika reported in its statement. “However, this does not impact the board’s commitment for the company and its stakeholders. The future compensation proposed by the board for the group management was approved.”
The proposal to remove the opt-out clause was rejected. The SWH shareholders did not have any restrictions on this vote.
In another move, shareholders approved a special audit for Sika.
“The request of the shareholder group consisting of Cascade Investment LLC, Bill & Melinda Gates Foundation Trust, Fidelity Worldwide Investment and Threadneedle Investments for a special audit was accepted by the general meeting. The special audit will examine whether the company, in particular the representatives of SWH on Sika’s board, have provided the Burkard family or Saint‐Gobain with non‐public information over the last 24 months. By approving this proposal the shareholders have rejected a counter‐proposal of SWH,” according to Sika’s statement
Shareholders also approved the appointment of a special expert committee.
“The second request of the shareholder group Cascade/Bill & Melinda Gates Foundation Trust/Fidelity/Threadneedle for the appointment of a special expert committee, consisting of Peter Montagnon, Peter Spinnler and Jörg Walther, was also approved by the shareholders. By this, a control body is established that will supervise the future conduct of the board of directors following a possible change of control in order to prevent conflicts of interests and disadvantages for the public shareholders as a consequence thereof. The term of office of the committee will run at least until the annual general meeting 2017. The body will, however, remain inactive as long as the majority of the board of directors consists of individuals who are independent from the family shareholder and Saint‐Gobain. The committee will regularly report on its activities,” according to Sika.
With the approval of this proposal, the shareholders automatically rejected a counter‐proposal of SWH. “For this agenda item and for the resolution on the special audit a majority of the capital and not of the voting rights was required,” Sika noted in its statement.
And in a final move during the meeting, the shareholders approved a proposal by SWH for an extraordinary general meeting to be held July 24, 2015.
The following agenda items are expected to be discussed:
—Removal of the independent board members Monika Ribar, Paul Hälg and Daniel Sauter;
—Election of Max Roesle as chairman; and
—Approval of the compensation of the board.
During the meeting, Sika’s chairman indicated “the extraordinary meeting is not necessary” just prior to the vote.
However, in this case, the shareholders did not vote according to the board’s recommendation.
Saint-Gobain was not represented at the meeting; however, the company issued a statement shortly after the event reiterating its goal to obtain majority voting rights in Sika.
“Saint-Gobain takes note of the decisions taken today at Sika’s annual general meeting following the restriction of the voting rights of SWH, decided by Sika’s management board in violation of SWH’s rights,” according to Saint-Gobain’s statement.
“In anticipation of these decisions, the group had extended the term of the contract signed with the Burkard family until June 2016. The resolution regarding the deletion of the opt-out clause, whose validity has been confirmed twice by the Swiss Takeover Board in recent weeks, was not adopted. Saint-Gobain reiterates its determination to complete the transaction and has full confidence that the Swiss courts shall allow SWH to regain their rights according to the law,” according to the statement.
While the Swiss Takeover Board has decided to uphold Sika’s opt-out clause, in favor of SWH, the Swiss Cantonal Court of Zug has denied SWH’s request to uphold the Burkard family’s voting rights in Sika.
Swiss financial regulator FINMA has yet to speak out on the proposed transaction. Sika investors have said they will appeal the Takeover Board’s decision with this authority.
Saint-Gobain’s bid to acquire the majority of voting rights in Sika is far from decided after this meeting. It appears the battle will play out in the Swiss court system.