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!
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