Sulzer rebuffs InCentive bid

InCentive Capital made a takeover offer for Sulzer AG on Monday but today the Sulzer board recommended a rejection of that offer saying ‘it does not offer sufficient value to our shareholders’.

The board of Sulzer AG, the Swiss manufacturing group, has advised shareholders to reject a takeover bid from InCentive Capital, saying that the realignment of Sulzer Corporation is already underway and will create greater value for shareholders, employees and customers.

Commenting on the offer, a company statement said: “Evaluation of this public tender offer by Sulzer and its external advisers has shown that it is lacking strategy and does not offer sufficient value to our shareholders.” Sulzer is being advised in its defense by Morgan Stanley Dean Witter and UBS Warburg.

Chairman and CEO of the group Ueli Roost continued: “This offer is not attractive for our shareholders. In actual fact, InCentive Capital merely intend to continue the corporate realignment worked out by us to their own benefit. The InCentive Capital offer is significantly lower than the value our shareholders expect from us.”

Swiss-based investment firm InCentive Capital announced its plans to takeover Sulzer on Monday. The deal was expected to be worth $2.64bn. Incentive is Sulzer’s largest shareholder with a combined direct and indirect 15 per cent stake. It had planned to spin-off the separately listed Sulzer Medica, a medical technology company, which it presently holds a 74 per cent stake in.

Sulzer, weakened by a share price drop that was itself caused by investors' rejection of a proposed merger of Sulzer and Sulzer Medica, has declared that it will continue to expand its industrial sector businesses and will go ahead with plans to wholly separate Sulzer and Sulzer Medica. The boards of the two units are to be reconstituted with Leonardo Vanotti becoming chairman of the Sulzer board, while Ueli Roost will remain chairman of the Sulzer Medica board.

InCentive’s proposed terms had offered Sulzer shareholders two Sulzer Medica registered shares plus either 410 swiss francs in cash or 0.9 registered shares in InCentive. The total cash and share deal offered was worth Swiss francs 4.4bn, according to Lombard Odier & Cie, one of the financial advisors to InCentive on the deal along with JP Morgan and Deutsche Bank. InCentive said that this figure valued the company at a premium of 40 per cent. However this premium referred only to Sulzer’s industrial business and represented a premium of only 12 per cent for the entire group, according to a research note from Zuercher Kantonalbank.

Chairman of InCentive and former Bundesbank president, Karl-Otto Poehl said on Monday: “We have followed the development of Sulzer with a certain amount of concern”. InCentive's chief executive, Rene Braginsky, added: “We see ourselves as a catalyst.”

Sulzer’s shares had traded as high as 1,309 francs in mid-September last year but have underperformed the blue-chip Swiss Market Index by almost 25 per cent since then. The shares stand at 1165 today.