Shares in specialty chemicals firm Elementis (ELM) fell 3.7% to 122p after it rejected a third takeover bid from US rival Minerals Technologies.
The company called the latest offer of 130p per share, which values the firm at £755 million, ‘highly opportunistic, coming at a low point of earnings and value’.
It highlighted that the price was significantly below its 2019 year-end, pre-pandemic closing level of 179p, and said Minerals Technologies ‘continues to significantly undervalue Elementis and its future prospects’.
The board of directors also claimed the bid failed to recognise the firm’s ‘differentiated, high-quality assets that merit a premium multiple’ and ignores Elementis’s ‘clear strategy to create value for its shareholders’.
The latest bid comes after Elementis rejected an initial offer from the US firm of 107p per share and a second pitch of 117p per share in November.
Elementis insisted it is ‘focused on maximising value for shareholders and would always consider engagement at a level that appropriately reflects the fair value of Elementis.’
ELEMENTIS ‘WORTH 200P PER SHARE’
Expanding on why the latest bid still undervalues the firm, Elementis pointed to the fact it is the owner of ‘differentiated resources with high scarcity value’, including the world’s only commercially viable high-quality rheology grade hectorite mine.
It added that as a result of the significant refocusing of the group, over 80% of earnings are now from the premium performance additives businesses of Personal Care, Coatings and Talc, which benefit from ‘fundamentally attractive’ margins and GDP growth.
Elementis said its Personal Care, Coatings and Talc businesses have achieved an average adjusted operating profit margin of around 15% over the last three years, and that its medium term group adjusted operating profit margin objective is 17%
It argued that specialty chemicals companies with margins in the range of 14% to 17% currently trade at 17-19x 2021 EV/EBITA, and that applying this range to average operating profit for the Personal Care, Coatings and Talc businesses over the last three years implied a valuation of 163p to 190p per Elementis share.
The company added that this excluded its Chromium business, which could be valued at an additional 35p per share, implying a group valuation of 200p or more per share as the firm ‘delivers on its medium term objectives.’
