The French building materials company St Gobain recently agreed to acquire control of a Swiss adhesive and sealant firm, Sika, for SF2.8 billion (US$2.8 billion). The move has caused quite an uproar in Switzerland.
The issue isn’t the purchase itself. It’s that Sika has two classes of stock: shares (Namenaktien) held by descendants of the firm’s founder represent 16% of those outstanding, but 52% of the voting rights. St. Gobain is buying out the family at a very large premium. But it has no intention of buying in the publicly held shares (Inhaberaktien) …which have lost about a quarter of their stock market value since the acquisition was announced.
Another day in the life of holders of an inferior security in Europe.
What’s most interesting to me about this transaction is that it’s being offered as a cautionary tale for holders of shares in US internet companies like Google, Facebook…which also have a number of classes of stock, with voting control held by the founders.
While a repeat of the Sika experience might in theory occur in US social media, I can see three factors that argue against this:
1. St. Gobain/Sika is a case of a large company swallowing a smaller one. The US internet companies with voting control by insiders are by and large already whales. Who’s big enough to be the buyer?
2. In my experience, obtaining operational control either through a large minority interest or a small majority–and without the possibility of tax consolidation–is a particularly European phenomenon. US firms typically strive for at least 80% ownership, which allows funds to pass between parent and subsidiary without triggering a tax bill.
3. This is an especially nasty sellout of minority shareholders in Sika by the controlling Berkard family. Perfectly legal perhaps, and a possibility minority shareholders should have contemplated before buying, but nasty nonetheless. For a firm that makes industrial forms of glue, there’s not likely to be significant negative fallout for the business. In the case of GOOG or FB, treating loyal user/shareholders this poorly would be bound to have severe negative business consequences.