Ethos demands that companies remove opting-out clauses

Ethos, Swiss partner of ECGS, asks the boards of directors of the Swiss listed companies that have an opting-out clause in their articles of association to request that the shareholders waive this provision. The opting-out allows a shareholder who acquires more than 33.3% of the voting rights of a company to be exempted from the obligation to make an offer on the rest of the capital. Such a clause can put a company at risk and be very detrimental to the stakeholders, in particular to minority shareholders, as is currently the case at Sika.

The opting-out clause is included in article 22 of the Stock Exchange Act (SESTA) and exists in more than 25% of the Swiss listed companies included in the SPI index (see list in appendix). It allows a shareholder that holds more than 33.3% of the voting rights to sell their participation at a high premium, as the acquirer can control a company without having to make an offer to the minority shareholders.

In Sika's case, the Burkard family sold to a competitor, Saint Gobain, their holding company Schenker Winkler that holds 52% of the voting rights of Sika with only 16% of the capital. Given the existence of a double class of shares and of an opting-out clause, the family received an 80% premium on the share price, for a total consideration of CHF 2.75 billion. This allows Saint Gobain to control the company with 16% of the share capital.

In light of the important uncertainties linked to this transaction, Sika's share price dropped by approx. 30% in a week. The minority shareholders, among whom numerous Swiss pension funds, have lost more than CHF 2 billion in total. In parallel, one of the flagships of the Swiss industry could even disappear over time, despite Sika currently being well positioned in its market with very good growth perspectives. Seen from this angle, the lack of social responsibility of the fourth generation of the Burkard family is very disappointing.

To avoid penalising the Swiss economy and financial market in the future with such cases, Ethos asks the Swiss listed companies that still have an opting-out (opting-up) clause to pro-actively propose at their next general meeting to waive this provision from their Articles of Association, in the interest of stability and long-term economic prosperity.

Swiss listed companies with an opting-out (opting-up) clause

12.12.2014