Sika investors Gates and Cascade step up fight against takeover

Shareholders Cascade Investment LLC and the Bill & Melinda Gates Foundation Trust have increased their efforts to block members of the founding Burkard family from selling their stake in Sika AG to competitor Cie. de Saint-Gobain SA for about $3 billion.

Cascade and the Foundation Trust are suing board director Urs Burkard for his part in the proposed transaction according to a statement released on Monday. They said he failed in his duty to act in the best interests of Sika, when negotiating the sale of the family’s 16 percent stake with majority voting rights to Saint-Gobain.

Saint-Gobain already had to extend the deadline for completing the transaction to mid-2016, and the investors said that resisting the transaction “has become a matter of principle.” The lawsuit will be an unwelcome sign for the Burkards that the minority investors are committed to fighting the deal that hands just the family an 80 percent premium for their holding.

“We hope this situation will be resolved soon for the sake of all of the stakeholders of Sika, but in our capacity as one of the largest owners of bearer shares we will continue to oppose the proposed transaction until reasonableness prevails,” Cascade’s Chief Investment Officer Michael Larson said in a letter to Sika’s Chairman Paul Haelg.

Sika declined 0.5 percent to 3,481 francs as of 4:35 p.m. in Zurich. Saint-Gobain stock was up 2 percent at 42.05 euros.

The transaction was negotiated in secret, prompting a backlash from investors including Jupiter Asset Management Ltd. and Threadneedle.

Cascade and the Foundation Trust have appointed Greenhill & Co. as an adviser in their fight and have asked Swiss courts to review the conduct of Urs Burkard, the instigator of the deal, for any breach of duties as a director, with any damages to be reimbursed to Sika.

Last month, Southeastern Asset Management declared holding 3 percent of Sika’s share capital via an investment vehicle working with billionaire Nassef Sawiris, while challenging the basis of the Saint-Gobain deal as it stands.

“While at this time our action is solely against Urs Burkard for payment of damages to Sika, we reserve the right to demand further payments for damages from him and to extend our request for legal redress to other members of the board of directors who were elected in their capacity as representatives of the family,” Larson said.

Urs Burkard had the right as a board member to sell his stake in Sika, a spokesperson for the family said, adding that the threatened legal action hasn’t been received yet, and a liability suit wouldn’t have any legal basis according to Swiss law.

The legal battle has had an impact beyond Sika. Alfred Schindler, chairman of elevator maker Schindler Holding AG said he’s looking to strengthen company statutes against certain takeover scenarios after seeing a “soap opera” of a situation arise at Sika.