Top Elementis Investor Pushes Asset Sales After Bid Rebuffed

(Bloomberg) -- A top investor in Elementis Plc said the U.K. specialty chemicals group should explore asset sales if it continues to rebuff takeover offers from U.S. rival Minerals Technologies Inc.

Elementis management pursued “expensive, debt-funded acquisitions” that hurt its share price and invited opportunistic approaches, according to J O Hambro Capital Management Ltd. While the latest bid undervalues Elementis, it would be difficult to back the board if a more serious proposal emerged, said Alex Savvides, a senior fund manager at the firm.

“We have concerns about both the Elementis board’s refusal to enter into discussions with Minerals Technologies as well as the broad strategy currently being pursued,” Savvides, whose firm owns about 5.8% of the U.K. company, wrote by email. “Shareholders urgently need to hear the board’s alternative method of value creation.”

Shares of Elementis have fallen 35% this year. The company this week rejected the latest bid of 680 million pounds ($907 million) from Minerals Technologies, saying it “significantly undervalued” the company and its prospects. The suitor had already increased its offer to 117 pence per share, from an earlier proposal of 107 pence.

Elementis should consider a disposal of its SummitReheis division, which produces antiperspirant ingredients, according to Savvides. It’s “unlikely” the business ever generated returns above the cost of capital, and “we would like to hear why the group remains the best owner,” he said.

There’s also merit in a sale of Elementis’s chromium division, which makes chromic acid used for metal finishing, he said.

A representative for Elementis said the company provided “significant detail” on its innovation, growth and efficiency strategy at its most recent Capital Markets Day.

Other large investors in Elementis include APG Asset Management NV, Ameriprise Financial Inc. and Soros Fund Management LLC, according to data compiled by Bloomberg.

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