Chemicals group Elementis has rejected calls from one of its major shareholders, Franklin Mutual Advisers, to sell the company. Franklin, which holds a 9.8% stake in Elementis on behalf of clients, expressed concern over the company’s “stagnant” share price and recent “value destructive acquisitions”. However, Elementis argued that an immediate sale was not in the best interests of its shareholders, citing the substantial value that still needs to be realized. Elementis stock rose 12.3% on Wednesday following the news.
Franklin Mutual Advisers criticized Elementis for its underperforming share price and questioned management’s ability to drive growth. In a letter to the company, Franklin expressed dissatisfaction with recent acquisitions that it believed had eroded confidence in Elementis. The company’s stock has only gained 3.8% this year, prompting Franklin to call for a sale of the company.
Elementis responded by stating that it continues to make progress towards its medium-term goals, including achieving a 17% adjusted operating margin and reducing net debt and core profit. The company argued that an immediate sale would not be in the best interests of its shareholders. Elementis stock rose by 12.3% to 125.4 pence following the announcement, making it the top percentage gainer on the FTSE 250 index.
Franklin Mutual Advisers, in its letter, suggested that Elementis was not of a sufficient size to achieve its targets. The letter was signed by portfolio managers Steve Raineri and Chris Meeker. Elementis did not directly address this concern in its statement.
While Elementis has rebuffed calls for an immediate sale, it remains to be seen how the situation will develop. Shareholders will be closely watching the company’s progress towards its stated goals and any potential changes in strategy.
More detail via Daily Mail Online here… ( Image via Daily Mail Online )