Shares in FTSE 250 chemicals group Elementis (ELM) have soared more than 20% to 163p after reports emerged that it has received a new takeover approach at a big premium to its previous share price.
Sky News reports Elementis has received a bid, said to be a mixture of cash and shares, from Nasdaq-listed chemicals firm Innospec that values Elementis at over £1 billion, or more than 200p per share, representing a 47% premium to yesterday’s closing price of 136p.
As of 10am however there had been no official word from either company regarding the reported offer.
It comes after Elementis rebuffed a series of takeover approaches last year from US firm Mineral Technologies, which had bids of 107p, 117p and 130p per share rejected.
FAIR VALUE DEAL
Elementis said at the time that it was ‘focused on maximising value for shareholders and would always consider engagement at a level that appropriately reflects the fair value of Elementis.’
This potential new offer from Innospec looks like it could well be at that level after Elementis detailed last year following the Mineral Technologies bids how it should be valued at around 200p per share or more.
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.
ATTRACTIVE MARGINS
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.’
