Sika: not set in stone

The Swiss have historically been adept at quietly making money while wars rage around them. That may explain the impressive performance of Sika in tense circumstances.

For almost two years, the producer of cement additives has been the subject of a stand-off between its directors and minority shareholders on one hand, and the Burkard family on the other. The family wants to sell its 16 per cent stake (which comes with 52 per cent voting rights) to French building products group Saint-Gobain without a general offer to all shareholders. Minorities have objected noisily. Yet the protracted stand-off over future ownership does not seem to have affected the company’s operational performance.

At a capital markets day on Tuesday, Sika reaffirmed its guidance for the current year and reiterated a strategy of organic expansion, cost control and bolt-on acquisitions that has served it well since inception in 2012. Sales have grown and operating margins have risen from 7.6 per cent in 2011 to 12 per cent in 2015. Analysts’ forecasts for this year’s earnings have risen by almost a quarter. The market has noticed. Since Saint-Gobain’s chief executive urged Sika’s board to “concentrate on running the company” rather than fighting the bid, the Swiss company’s shares have risen 56 per cent (in local currency terms). That compares to a 9.6 per cent gain in his own company’s stock.

Whether such performance would endure under Saint-Gobain’s tutelage is doubtful. The French company has pledged to maintain Sika’s stock market listing and offered reassurances to its employees. But more than 100 Sika managers have pledged to scorch the earth by resigning en masse if the takeover goes ahead.

The market shows few signs of concern at either prospect. It should do. Sika’s directors have so far thwarted the Burkard/Saint-Gobain deal by using a provision in the company’s articles of association to limit the Burkards’ voting rights to 5 per cent, a manoeuvre subject to legal challenge. If the court rules against Sika, little stands in the way of the deal completing. When it was first announced, Sika shares fell by a fifth. They could easily do so again.

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BDC 305 Jun 2023