In Switzerland, several minority
shareholders in SIKA are contesting the purchase by Saint-Gobain of the family
holding company that controls SIKA with 16% of the shares and multiple voting
rights, guaranteeing it control of general meetings. These minority
shareholders are contesting the transfer of ownership, taking the view that
Saint-Gobain should launch a takeover bid for the SIKA Group, rather than
buying the shares in the family holding company that controls SIKA at the list
price.
Saint-Gobain is backed up by the company’s
articles of association, which stipulate these multiple voting rights, legal
under Swiss law; it is asserting its rights and the selling family is taking
legal action against the SIKA Board, which withdrew the family’s voting rights
at the general meeting. Following this transfer of ownership, relations between
the controlling family, the Board – on which only one representative of the
family sits – and the company directors are clearly poor.
Without getting into the details of this
tussle for control of SIKA or taking a position on whether or not these two
companies are complementary, this transaction is interesting because it is a
good demonstration of the defects of a stock market where it is possible to
take control of a company at a knock-down price. This is not
Switzerland-specific, because it exists in Germany, in France (double voting
rights) and even the US (multiple voting rights), to name but a few.
Saint-Gobain has the law on its side and
its actions are bolstered by the transparency of the transaction to buy one
company that controls another. These multiple voting rights are not attached to
people but to a legal entity, which can be bought and sold. What is more, any
investor investing in SIKA could find out about the existence of these multiple
voting rights.
That inevitably raises a question for
minority investors. It will be difficult for them to get rid of double and
multiple voting rights quickly. Last year, PhiTrust unsuccessfully tried to
limit their implementation in some French companies under the Florange Law, and
they will now be hard to shake off in many countries. Investors would therefore
be well-advised, before buying any shareholdings, to analyse the group’s
control structure to see whether the creeping acquisition of a controlling
stake without paying full price would be possible. This concerns a great deal
of top companies in Europe and throughout the world, so they are not doing it
most of the time!
The SIKA example is interesting in this
regard because the Swiss minority shareholders are seeking a change to Swiss
legislation to render double or multiple voting rights non-transferable. If
they manage that, it would change power relationships in Switzerland and
numerous people are weighing into the debate, making it all the more gripping.
All the forces involved are preparing for battle, in the expectation that the
arguments to come and the Swiss courts’ ruling will be a key milestone in
European shareholder democracy.
We, as minority shareholders, must express
our opinion, and it is particularly important that we do so in the context of
the European Shareholder Rights Directive, which will make itself very clear on
this subject. Let’s join forces!
Olivier de Guerre
PhiTrust
