Elementis PLC on Monday responded to an open letter from Gatemore Capital Management LLP, but avoided direct responses toward demands from the activist shareholder.
The London-based chemicals company, which manufacturers ingredients for consumer and industrial products for a variety of industries, did not respond to Gatemore’s demand to replace its current Chief Executive Officer Paul Waterman, or the shareholder’s request to conduct a strategic review.
Elementis said: ‘The board continues to believe that shareholder value is best driven by a focus on delivering the substantial actions that are currently being progressed at pace throughout the business and that underpin progress towards the 2026 targets of 19%+ operating margin, over 90% cash conversion and over 20% return on capital, generated by $90m of above market revenue growth and $30m cost savings.’
It added that it welcomed feedback from all shareholders and looks forward to updating the market in its trading market alongside its annual general meeting on Tuesday.
Gatemore earlier Monday had said it believed ‘that many of Elementis’ current problems are self-inflicted and demonstrate a continued failure of judgement of the company’s top leadership team, most notably the CEO.’
Gatemore, which holds a stake of around 0.6% in Elementis, lamented a ‘persistently weak share price’, adding that the company needed to rebuild investor confidence and unlock ‘significant’ value for its shareholders.
Elementis shares rose 0.6% to 137.98 pence each on Monday afternoon in London. The shares are 13% higher than a year ago, but 12% lower than five years ago.
Gatemore said since CEO Waterman came into office in 2016, the company ‘delivered subpar total shareholder returns as compared to its peers, despite the share price having been supported by three takeover approaches throughout the period,’ citing underperformance of 86 percentage points compared to its specialty chemicals peers and 76 percentage points compared to the FTSE 250.
Further, the investor alleged poor capital allocation, such as about $650 million having been spent on mergers & acquisitions net of disposals, worth over half of Elementis’s current entire market capitalisation.
Gatemore asked Elementis to conduct a strategic review of the portfolio aimed at refocusing the business to make it more attractive for a strategic buyer.
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