SIKA AG
SIX Swiss Exchange: SIK Meeting Date: 4/14/2015
Sika’s 2015 annual meeting will feature an unprecedented battle in which the founding family teams up with a French conglomerate to challenge all other shareholders, the results of which have serious implications for the future of the Company. Currently, the scales are relatively balanced, though one small move could tip them in either direction.
Non-controlling shareholders will be fighting to ensure that their rights are not trampled by the founding family, which maintains control over Sika through a dual class share structure despite only owning 16% of equity. Demonstrating blatant disregard for minority shareholders, in December 2014, the Burkard family agreed to sell its stake in Sika to Saint-Gobain for an approximately 80% premium while availing of a previously uncontroversial clause in Sika’s articles of association allowing significant shareholders to opt-out of the requirement to make a bid for all shares upon crossing relevant ownership thresholds, which would have been triggered had Saint-Gobain sought to gain a controlling stake on the open market. Shareholders may now rightfully question the family’s previous assertions that it intended to provide stability at the Company as an anchor shareholder, while protecting the interests of all shareholders. For its part, Saint-Gobain has been forthcoming that it intends to take control of Sika and its board without paying a takeover premium to remaining shareholders.
At present, independent directors hold a slim majority on the board. Not be outdone by the Burkards, the independent directors have themselves invoked an also little-noticed clause of Sika’s articles of association allowing them to limit the Burkard family’s voting rights to 5% of total outstanding votes for the upcoming meeting. So far, the family’s legal appeals to lift this restriction have been denied; however, the family has stated that it intends to seek further legal action to reverse this decision or invalidate the decisions made at the annual meeting.
Meanwhile, the founding family has submitted a shareholder proposal to elect a new chairman, which would tip the scales in its favor if successful by upsetting the independent directors’ majority on the board. Other shareholders have proposed several additional proposals, supported by a majority of the board, which would remove the opt-out clause from the articles of association, appoint a special auditor to review all decisions made with regard to the takeover by Saint-Gobain, and appoint an expert committee to oversee the board’s actions if it is controlled by representatives of the Burkards or Saint-Gobain. Of course, the outcome of these proposals hinges on whether the Burkard family is successful in its appeals to reinstate voting rights.
Two remaining open questions further complicate the situation: (a) will the deal be approved by Swiss anti-trust authorities, and (b) will the Swiss Takeover Board allow Saint Gobain to continue opting out of the mandatory bid requirement? So far, the Takeover Board has ruled in favor of the initial sale, but it has yet to express an opinion on whether the Saint Gobain can take full control of Sika without making a bid.
Despite the outstanding questions, non-controlling shareholders in Sika, representing a majority of its equity, can certainly make a powerful statement through their voting decisions at the upcoming annual meeting. The majority investors are certainly hoping that the scale tips in their favour on April 14.
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