MARKET REPORT: Chemicals giant Elementis soars as top investor calls for sale

Shares in Elementis soared after its top investor publicly urged the UK-based chemicals business to put itself up for sale before the end of next month.

In a punchy open letter, Franklin Mutual Advisers accused the London-listed firm of ‘a shocking amount of shareholder value destruction’ given the stock price has plunged by more than 50 per cent since 2016.

The New Jersey-based investment manager also criticised Elementis for having to fork out more than £160million in impairments associated with its £480million acquisition of a talc business in 2018.

But Franklin, which owns 9.8 per cent of Elementis having first invested in December 2020, insisted the specialty chemicals business has ‘significant value to a strategic buyer’ and ‘would benefit from being part of a larger organization to achieve economies of scale’.

The investment manager also urged the group to kickstart a search for a buyer before its next set of results at the end of October. Shares soared 10.6 per cent, or 11.8p, to 123.4p. 

Shareholder unrest: Franklin Mutual Advisers has called for Elementis to be sold, accusing the London-listed firm of ‘a shocking amount of shareholder value destruction’ 

But Elementis batted away such suggestions and argued the sale of its chromium division in January, and subsequent focus as a pure play specialty chemicals business, has set it on the right path.

‘Our board does not believe that Franklin’s request to initiate an immediate sale of the company is currently in the best interests of its shareholders given the substantial value still be to be realised,’ a spokesman added.

Elementis owns the world’s largest mine of hectorite, a rare white clay substance that is used in creams by premium cosmetic companies such as L’Oreal, while its coating arm makes vital ingredients used in paint. 

Investors enjoyed a positive day of trading as the FTSE 100 gained 0.9 per cent, or 71.45 points, to 7731.65 and the FTSE 250 added 1.6 per cent, or 285.67 points, to 18712.37. 

Hopes over an end to further interest rate rises were sparked by a surprise fall in inflation in the UK.

Car dealer Pendragon made gains after it rejected a joint takeover proposal of 28p a share from Hedin and Penske on the basis that it ‘fundamentally undervalues’ the company.

Stock Watch – Falanx Cyber Security

Falanx Cyber Security more than doubled in value after the firm said it was in advanced talks over the sale of its cyber security division.

The group said that ‘there can be no certainty’ it will complete the sale.

Falanx had planned to publish its results for the year to March 31 at the end of September. 

But it will no longer to do so given the talks – meaning its shares, which surged 104.4 per cent, or 23.5p, to 46p, will be suspended from trading from October 2.

Instead, it vowed to press on with the deal it agreed earlier this week to offload its UK motor business to US rival Lithia Motors for £250million. Shares surged 13.9 per cent, or 3.3p, to 27p.

There was also good news for AstraZeneca after its division Alexion bought and licensed the assets of Pfizer’s early-stage rare disease gene therapy portfolio in a deal worth up to £800million. Shares rose 3.2 per cent, or 334p, to 10950p.

Profits at M&G reached £390million in the first half of 2023 – up from £298million during the same period last year – as the asset manager cashed in on improving market conditions following the chaos caused by last year’s mini-Budget. Shares rose or 1.7 per cent, or 3.3p, to 202.7p.

Any news of shareholder returns is likely to whet investors’ appetites. That was the case with Page Group as the recruiter outlined plans to hand back more than £1.5billion to shareholders by 2030 alongside £400million of profit. Shares rose 1.8 per cent, or 7.2p, to 415.8p.

Ten Entertainment headed in the other direction as the bowling alley operator’s profit fell by a quarter to £15.75million in the 26 weeks to July 2. 

That came despite a strong summer helping sales rise 3.3 per cent to £65.3million. Shares fell 3.2 per cent, or 9p, to 275p.

But rival Hollywood Bowl surged 7.2 per cent, or 17.5p, to 259.5p.

Close Brothers agreed to buy Ireland’s Bluestone Motor Finance, which offers loans to help people buy cars or vans, in an undisclosed cash deal that should be completed in the final quarter of 2023. Shares rose 3.7 per cent, or 30.5p, to 866.5p.

This post first appeared on Dailymail.co.uk