(Bloomberg) -- One of the most acrimonious takeover fights in Europe, which raged for more than three years, is drawing to a close.
Cie. de Saint Gobain SA, Swiss adhesives maker Sika AG and its founding family unveiled a complex accord Friday to end a protracted Swiss legal dispute. Under the terms, the heirs behind Sika sold their entire 17 percent stake for 3.22 billion francs ($3.21 billion) to Saint Gobain, which will give up the special voting rights that were at the heart of the conflict with other Sika shareholders and management.
Sika in turn bought an almost 7 percent holding from Saint Gobain, a French supplier of building materials. Sika surged as much as 11 percent in Zurich trading as the takeover threat receded.
The battle had thrust the opaque world of corporate family privilege into the open, with the two sides fighting in court as Sika resisted a takeover that it argued left minority shareholders at a disadvantage. The original 2014 plan would have seen Saint Gobain gain the majority of voting rights held by the Burkard family after acquiring just a 16 percent stake, without offering the same purchase terms to other investors. The accord includes the doing away of the special votes, with Saint Gobain walking away with a profit and as the biggest Sika shareholder.
"For Sika, this is extremely positive because it takes away the insecurity surrounding the company,” said Markus Mayer, an analyst at Baader Bank. “The market didn’t expect this to end badly for Sika. But there was a residual risk and the legal battle made the stock uninvestable for many investors in North America.”
The multi-step agreement took two months to hammer out, nearly unraveling several times. In the end, Saint-Gobain’s payout to the Burkard family is 500 million francs more than the price agreed in December, 2014, according to the statement. The French supplier sold a 6.97 percent stake to Sika for 2.08 billion francs, and will retain a 10.75 percent holding for at least two years to lower capital gains taxes. Sika Chairman Paul Haelg called the French company’s holding a “financial participation” without a seat on the board.
Sika’s stake purchase represents a 795 million-franc premium over the share price on May 4, the statement said, while Saint-Gobain claimed net proceeds from the transaction of 600 million euros for shareholders.
The sides agreed to drop all litigation, and Sika has convened a shareholders meeting on June 11 to propose canceling the 6.97 percent share stake acquired from the family holding and converting all shares into a one share-one vote single class of stock. The deal was commended by investors including Cascade Investment and Bill & Melinda Gates Foundation who had fought against the original plan.
“The board and group management of Sika welcome this positive outcome,” Haelg said in Friday’s statement.“The introduction of a modern governance structure will provide Sika with a solid base to accelerate its growth.”
Sika shares rose 8.6 percent to 8,150 francs at 1:30 p.m. in Zurich, valuing the company at 21 billion francs, nearly triple what it was before the original deal was announced. Saint-Gobain traded 3 percent higher at 45.39 euros in Paris, taking gains to about 40 percent during the same period.
The deal is a “win, win, win for all parties but especially for Saint-Gobain,” Chief Financial Officer Guillaume Texier said on Bloomberg TV. Having failed to take over a market leader in adhesives and sealants, Texier said no decision has been made on how long the French company will hold its stake in Sika beyond the lock-up period. Rather than being restricted to just a financial investor, he indicated Saint-Gobain is ready to move on. Construction chemicals remains a strategic area of growth, and small- to medium-sized targets in markets like the U.S. are a focus area, he said.
With the uncertainty over the company’s future lifted, Sika executives were eager to detail plans, with Chief Executive Officer Paul Schuler saying Sika now has freedom to make acquisitions. They could be found sipping champagne in celebration after the meeting with analysts, investors and the media had ended.
"You will see some nice acquisitions in the future, and we have the firepower,” Schuler said at the presentation in Zurich. Uncertainty caused by the legal dispute disrupted Sika’s ability to go after some targets, and those prospects can now be revisited, he said.
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