Board of Directors recommends capital increase of CHF 330 million, but rejects the excessive capital increase proposed by the Beteiligungs GmbH/Renova group owing to the major disadvantages this would bring for existing shareholders and the unclear terms of the transaction
Board of Directors supports the existing proportional representation of the family shareholders’ company on the Board, but rejects the removal of a current member and appointment of another, new member
According to the agenda for the annual general meeting of 28 June 2013, which is published today, the Board of Directors of SCHMOLZ+BICKENBACH AG is proposing that the 2012 annual report, annual financial statements and consolidated financial statements be approved, and that the annual result of CHF 15.851 million be carried forward to the new accounts.
With the aim of substantially strengthening the company’s capital base, the Board of Directors is also proposing a capital increase totalling CHF 330 million (around EUR 265 million) to the annual general meeting. A banking syndicate comprising BNP Paribas, Paris, Commerzbank Aktiengesellschaft, Frankfurt, and Credit Suisse AG, Zurich, has already undertaken to underwrite all the new shares issued in this capital increase. Existing shareholders’ preferential subscription rights are guaranteed.
The Board of Directors wants to use the proceeds of the capital increase to pay back some existing loans and to increase the company’s financial flexibility. It firmly believes that with this capital increase it can take the business forward on a sustainable footing.
However, the Board of Directors of SCHMOLZ+BICKENBACH AG rejects the much larger capital increase of CHF 434 million (around EUR 350 million) proposed in a request to add an item to the agenda by Schmolz+Bickenbach Beteiligungs GmbH, Düsseldorf. This company, which belongs to the main shareholder group of SCHMOLZ+BICKENBACH AG, represents the interests of the founder’s descendants and is contractually linked by an exclusivity agreement to Renova Holding Ltd, which is controlled by Russian investor Viktor Vekselberg.
By contrast with the capital increase proposed by the Board of Directors, however, the Board believes there is no guarantee that the transaction proposed by Schmolz+Bickenbach Beteiligungs GmbH can actually be effected. The Board of Directors believes that because of the decision taken by the Takeover Board on 24 May 2013, it is highly questionable whether there is still a contractual basis for Schmolz+Bickenbach Beteiligungs GmbH’s request for a capital increase. The shareholder group comprising the family shareholders and Renova revealed in the wake of this decision that they had cancelled the Shareholders and Investment Agreements that they had made with each other, and that they were now only bound to each other by an exclusivity agreement, though this does mean they are still a group. In addition, the involvement of Venetos Holding AG, which belongs to Renova, in the capital increase as envisaged in the request to add an item to the agenda, would be contingent on further conditions, and so cannot be regarded as guaranteed.
In the Board of Directors’ judgement, its own proposed capital increase of CHF 330 million is sufficient to achieve the company’s aims. The new management team at SCHMOLZ+BICKENBACH AG is currently pressing ahead with the company’s strategic reorientation. The latest quarterly operating results confirm that the company is making positive operational progress, revealing a much improved sales and earnings situation, as well as improved incoming orders and the initial positive effects of a cost-reduction programme.
The Board’s judgement about the size of the capital increase is backed by the assessments of a leading audit company, expert analysts and bankers. The size of increase it is recommending is also consistent with the agreement that the company made at the start of April 2013 with its creditor banks. Finally, the capital increase proposed by the Board of Directors will achieve the desired strengthening of the company’s capital base without placing undue financial demands on existing shareholders or excessively diluting their equity interests, and without running the risk that these shareholders would lose much of their influence over the company.
With regard to the proposed restructuring of SCHMOLZ+BICKENBACH AG’s Board of Directors, which has been added to the agenda at the request of Schmolz+Bickenbach Beteiligungs GmbH, Düsseldorf, the Board acknowledges the claims of the founder’s descendants to be represented on the Board in proportion to their current 40% shareholding, i.e. with 4 of the maximum of 9 seats. This should give the representatives of the founder’s family the opportunity to fulfil their shared business responsibility at Board level. However, the Board of Directors once again rejects any claims that go beyond this, such as the one that the founder’s descendants and Renova wanted to assert in the request that has been rejected by the Takeover Board.
Consequently, in the interests of good corporate governance, the Board does support the candidacy of Carl Michael Eichler, Roger Schaak and Heinz Schumacher as proposed by Schmolz+Bickenbach Beteiligungs GmbH. However, the Board of Directors recommends rejecting the request from the same company to remove Marc Feiler as an elected representative of a family shareholder. It also recommends rejecting the request to appoint Oliver Thum, the Managing Director of the Schmolz+Bickenbach GmbH & Co. KG, because this would lead to excessive representation as described above.
The Board of Directors recommends that the two current Board Members Hans-Peter Zehnder and Manfred Breuer, whose terms of office are expiring, and whose removal has also been requested by Schmolz+Bickenbach Beteiligungs GmbH, be re-elected for a one-year term. Helmut Burmester and Alexander von Tippelskirch are not standing for re-election.
About SCHMOLZ+BICKENBACH
SCHMOLZ+BICKENBACH was established in 1919 in Dusseldorf by Arthur Schmolz and Oswald Bickenbach. Since 1937 the company bearing their names has been a synonym for tradition in steel. Since the acquisition of the former Swiss Steel AG in 2003, SCHMOLZ+BICKENBACH has been listed on the SIX Swiss Exchange (STLN). Today, the SCHMOLZ+BICKENBACH Group is one of the world’s largest manufacturers, processors and distributors of special-steel long products. The Group has a total of approximately 10 000 employees. SCHMOLZ+BICKENBACH is one of the leading producers of stainless long steels as well as tool steels, and is one of the ten largest companies for alloy and high-alloy special and engineering steels.