PARIS/ZURICH (Reuters) - Swiss adhesives maker Sika SIK.S has repelled a hostile takeover bid from Saint-Gobain (SGOB.PA) in a $3.2 billion deal that gives the French company a minority stake but may make Sika a more attractive target for others.
Under the transaction announced on Friday, Saint-Gobain dropped its plan to wrest control of Sika via a minority stake that carried extra voting rights. Instead, Saint-Gobain gets a 10.75 percent holding.
The deal will also change Sika’s structure so that each share has just one vote, removing the previous uneven voting arrangement that analysts said had been a deterrent to possible bidders.
Saint-Gobain’s bid for the controlling stake held by the Burkard family in 2014 was opposed by Sika’s board and investors, including the Bill & Melinda Gates Foundation. The tussle was fought out during long and expensive court cases.
Shares in Sika surged 10 percent in early trading, on relief that the dispute was over and on the prospect it could now be a target. Saint-Gobain shares also rose by around 3 percent.
Saint-Gobain will acquire the stake from the Burkard family, heirs to the founder of Sika, for just over 3.2 billion Swiss francs ($3.2 billion), temporarily giving it a 17 percent stake.
Although the French firm will also initially hold 52 percent of the company’s voting rights, Saint-Gobain will then sell nearly 7 percent of shares back to Sika and retire the extra voting rights at an extraordinary shareholders’ meeting.
This will leave Saint-Gobain with a 10.75 percent stake in Sika. It will not get a seat on Sika’s board.
Saint-Gobain deal bars it from making a tender offer for Sika for at least six years, but analysts said Sika’s simplified share structure and new voting system could heighten bid interest from others lured by Sika’s 6.3 billion francs in annual sales and 14.3 percent operating margins.
“Sika has always been an interesting target, it’s just the odd shareholder structure that has been the hold up,” said Sanford Bernstein analyst Phil Roseberg.
Asked if the new structure would be a catalyst to invite other suitors, Sika Chairman Paul Haelg replied: “I cannot say, might be.”
Under the deal, the Swiss company will pay Saint-Gobain about 2.1 billion Swiss francs to cover the cost of the shares it buys back from the French firm.
The deal would lead to a positive net result of 600 million euros ($715 million) for Saint-Gobain and would be in line with its policy of small-to-mid-sized acquisitions, Saint-Gobain Chairman and Chief Executive Pierre Andre de Chalendar said.
“It’s a good deal for all parties. It will be interesting to see how Saint-Gobain pursues its acquisition strategy,” said Jerome Schupp, fund manager at Geneva-based investment firm Prime Partners, who said he was considering buying Saint-Gobain shares.
Sika Chief Executive Paul Schuler said resolving the Saint-Gobain dispute means the Swiss firm now has the resources for acquisitions worth 500 million francs.
“If it’s in the right strategy, we are able to go even higher,” Schuler told news conference. “You will see some nice acquisitions in the future, and we have the firepower.”
Meriem Mokdad, fund manager at Roche Brune Asset Management which owns Sika shares, said the deal was a “win-win” for the two firms.
The dispute for control of Sika began when Saint-Gobain offered 2.75 billion francs to buy the Burkard family’s stake.
“We are pleased that Saint-Gobain, as a significant Sika customer, is now the company’s largest shareholder,” Urs Burkard, spokesman for the Burkard family, said in a statement.
“The solution agreed between the parties involved taking into account the interests of all shareholders and forms the basis for continuing Sika’s success story,” he added.
The Burkards had been seeking to unload their shares for a premium.
Sika investors Cascade Investment LLC and the Bill & Melinda Gates Foundation Trust welcomed the deal, adding they looked forward to Sika’s “prosperous future as a truly independent company”.
($1 = 0.8397 euros)
($1 = 0.9991 Swiss francs)
Reporting by Sudip Kar-Gupta in Paris and John Miller in Zurich; Editing by Sherry Jacob-Phillips and Edmund Blair