- Gatemore has over 4 million shares in Elementis
- Shares up nearly 2% to 139p in morning trading
- Shareholders keen to unlock value
Shareholders in Elementis (ELM) once again expressed dissatisfaction with the specialty chemicals company by writing an open letter to the board calling for change which is ‘long overdue.’
Liad Meidar, managing partner at Gatemore Capital Management - Gatemore Special Opportunities Fund (GSOF) currently holds over 4 million shares in Elementis - referred to ‘the gulf between the fundamental strength of Elementis and the company’s persistently weak share price.’
In the letter to Mr John O’Higgins, chairman of the Elementis board, Meidar said the company needs to take ‘key steps’ to rebuild investor confidence and unlock significant value for its shareholders.
Meidar is calling for O’Higgins to ‘exercise leadership’ and ‘unlock deep value in the stock’ by carrying out the following: confirm the details around Elementis’ cost-saving program; replace the current CEO and select recently appointed non-executive director Heejae Chae to lead the search process; conduct a strategic review of the portfolio with the aim of making it more attractive for a strategic buyer.
In response to Gatemore's open letter the Elementis board said in a statement: ‘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, >90% cash conversion and >20% (return on capital) ROC, generated by $90 million of above market revenue growth and $30 million cost savings.
‘The board continues to engage with, and welcomes feedback from, all shareholders, with a clear focus on driving shareholder value, and looks forward to updating the market in its trading update alongside its (annual general meeting) AGM tomorrow.’
BID BY US PRIVATE EQUITY FIRM
Back in February, shares in the specialty chemicals maker soared unexpectedly as it received a preliminary bid from a US private equity fund.
New York based firm KPS Capital Partners submitted an offer of 160p per share, however the Elementis board rejected the offer which disappointed shareholder activists at the time.
EXPERT VIEW
Russ Mould investment director at AJ Bell said: ‘FTSE 250 chemicals group Elementis enjoyed a small bounce after major shareholder Gatemore Capital published an open letter criticising the company, saying it had ‘lost its direction’ and that it had been mis-managed.
‘Not one to mince its words, Gatemore has called for the CEO to be replaced and conduct a strategic review. Naming and shaming in this way are classic techniques by investors who are fed up with a company.
‘Typically, this tends to be a measure of last resort and it will be interesting to see if other investors rally together and put on more pressure to enforce change in the business.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Steven Frazer) own shares in AJ Bell.
