Fintech PR
Franklin Mutual Advisers Sends Letter Urging Elementis’ Board of Directors to Pursue an Immediate Sale of the Company
LONDON, Sept. 20, 2023 /PRNewswire/ — Franklin Mutual Advisers, LLC (“Mutual Series”), which controls a 9.8% shareholding on behalf of its clients in specialty chemicals company Elementis PLC, has sent a public letter to the Chair of the Board of Directors.
You can find the letter here:
September 20, 2023
Mr. John O’Higgins
Chairman of the Board
Elementis PLC
The Bindery
5th Floor, 51-53 Hatton Garden
London
EC1N 8HN
United Kingdom
Dear Mr. O’Higgins and the Board of Directors,
As you are aware, the clients of Franklin Mutual Advisers, LLC (“Mutual Series”) have held shares of Elementis PLC (“Elementis” or “the Company”) since December 2020. We control those shares as their agent. As of September 19, 2023, Mutual Series’ Franklin Small Cap Value Strategy controls 57,314,756 shares of the Company’s stock, or 9.8% of total shares outstanding, which is currently the largest holding on your register.
Mutual Series’ Franklin Small Cap Value Strategy seeks to invest in companies with strong fundamentals and good growth prospects, but undervalued share prices, across multiple sectors and industries. We employ a patient, long-term, buy-and-hold approach to investing, seeking to deliver value-added returns for our investors.
Attractive assets with a discounted valuation creates a compelling investment
We first invested in Elementis in December 2020 following the withdrawal of Minerals Technologies, Inc.’s (“Minerals Technologies”) offer for the Company and resulting share price decline. We have a long history of making investments in the specialty chemicals industry. Additionally, we were impressed with Elementis’ healthy market position in its personal care and coatings businesses.[1] The Company’s strong gross margins confirmed to us that its products reside at the premium end of performance additives. As value investors, we were also attracted to a stock that had declined more than 50% since 2016, an inexpensive valuation relative to history and peers,[2] the potential for upside in earnings from a cyclical recovery in the Company’s end markets and publicly stated commitment to operational improvement.[3]
As you know, the personal care business has consistently delivered the highest operating margins for the Company, and for the first half of 2023 represented 44% of adjusted operating profit before central costs. This business primarily comprises active ingredients for cosmetics and antiperspirant actives with 85% of Elementis’ cosmetic products derived from natural materials.[4] The Company’s anti-perspirant active ingredients business holds the largest market share position in the world at 40%.[5] The Company’s coatings business (which produces high-value additives used in paint) contributed 41% of first-half 2023 results. The segment has consistently reported mid-to-high teens operating margins which attests to the Company’s ability to achieve value-based pricing.
Value destructive capital allocation resulting in shareholder losses
Despite these positive attributes, the Company’s capital allocation decisions have contributed to an extremely disappointing degradation in the share price. Specifically, the Company spent $860M to acquire SummitReheis and Mondo Minerals in 2017 and 2018, respectively. Subsequently, the Company has incurred over $200M in impairments associated with the Mondo Minerals acquisition.[6] Since 2016, the stock price has declined by more than 50% and the Company’s current market value is less than the amount spent to acquire these two companies.
This is a shocking amount of shareholder value destruction.
Inability to improve operating performance and financial returns
In 2016, Elementis appointed a new CEO and CFO to “Reignite Growth.” At the Company’s November 2019 Capital Markets Day, management established a 17.0% adjusted operating margin objective. Almost four years since this objective was established, the Company’s first-half 2023 adjusted operating margins were only 14.4%, far short of its goal. We acknowledge the pandemic occurred in this time; however, we question if this objective is even achievable and, if so, why it would not be increased following the divestiture of the lower margin Chromium business.[7]
As of the period ending June 30, 2023, the Company’s invested capital base has more than doubled to $1.1B from December 31, 2016, inclusive of the impairments mentioned above, while return on capital has more than halved, contributing to a 50% decline in the stock price.
Failure to find a clear path to narrow the Company’s valuation gap
In December 2020, Elementis received a takeover offer of 130 pence per share from Minerals Technologies. In March 2021, the Company received a conditional offer of 160 pence per share from Innospec, Inc. (“Innospec”). As justification for rejecting these offers, Elementis told shareholders that fair value ranged from 198 – 225 pence per share.[8] Since the rejection of the prior offers, the share price for Elementis has averaged a mere 123 pence, approximately 38% below the Company’s low end of fair market value.[9] In our opinion, this indicates a significant lack of confidence by shareholders (and the market) in management’s ability to unlock the substantial value inherent in the business.
Despite this, Elementis has significant value to a strategic buyer
We believe that the Company is not of a sufficient size to accomplish its targets. We contend it would benefit from being part of a larger organization to achieve economies of scale. The Company’s revenue is half that of its next closest peer (and a quarter of the size of the peer median of $3B). However, as noted above, prior attempts to gain scale inorganically have yielded disastrous results.
Under these circumstances, a strategic merger seems necessary and, ultimately, inevitable. A large portion of the Company’s corporate cost base could be eliminated by a strategic buyer with access to cost savings via economies of scale. Based on our analysis of precedent transactions, we believe cost savings available to a strategic buyer could be significant.
In our view, the prior offers from two strategic buyers confirm Mutual Series’ perspective that Elementis could be a desirable acquisition target. Recent value destructive acquisitions have totally undermined any confidence in management’s ability to use shareholder capital for inorganic growth. In any event, Elementis does not have the financial size (TTM EBITDA of only $138M) to execute transactions that will markedly change its scale and the depressed valuation rules out share-based transactions.
Elementis should immediately and publicly announce a sale process
The continued stagnant share price, far below prior acquisition offers and the Company’s own fair value range, is unacceptable to shareholders and should be unacceptable to the Board. Based on our analysis, we believe the private market value of the Company is significantly higher than today’s stock price.
We have considered multiple scenarios for the Company, including a change in management. However, due to several factors, including the substantial valuation gap to private market value, the strategic attractiveness of the business as evidenced by prior bidders, and its small scale, combined with significant synergies potentially available to a large buyer, we believe a sale of the Company is the most attractive option for shareholders.
As a result, we strongly recommend that the Company publicly announce a competitive and formal sales process (before the Company’s Q3 trading update on October 31, 2023) to investigate the possibility of maximizing value for all shareholders.
Communication: extensive prior dialogue expressing our concerns
In extensive private communications, which commenced in April 2021, we have pursued a constructive dialogue with individuals including yourself as Chair, Paul Waterman (CEO), Ralph Hewins (CFO) and James Curran (IR). In our many conversations, we extensively outlined our frustration with management’s value destructive capital allocation, inability to improve operating performance and failure to find a clear path to narrow the Company’s valuation gap.
In August 2021, we spoke in detail with you and Mr. Curran regarding our analysis that, while the Company had consistently produced EBITDA margins in-line with the median for the peer group, its returns on invested capital had significantly degraded following the acquisitions of SummitReheis and Mondo Minerals, on both an absolute basis and relative to the Company’s cost of capital.
In our February 16, 2023, letter to you, we further expressed our concerns and questioned management’s ability to deliver share price growth.[10] We concluded our letter with the recommendation that the Board initiate a review of strategic alternatives to maximize value for shareholders.
Due to a consistent lack of progress, we have now reluctantly decided to make this letter public. While we frequently engage with companies regarding various shareholder matters in private, we rarely do so in public. However, we believe it is in the best interest of all shareholders to be aware of these issues. Additionally, if more shareholders share their concerns with the Company’s Board, we hope these issues might finally be properly addressed.
Sincerely,
Steve Raineri Chris Meeker
Senior Vice President-Portfolio Manager Vice President-Portfolio Manager
Franklin Mutual Advisers, LLC Franklin Mutual Advisers, LLC
Franklin Mutual Advisers, LLC, the investment advisor for the Franklin Mutual Series funds, is a wholly owned subsidiary of Franklin Resources, Inc., a global investment management organization with subsidiaries operating as Franklin Templeton.
For more information on Franklin Mutual Advisers, LLC: www.mutualseries.com
For media enquiries, please contact Greenbrook: [email protected], Rob White and Tashi Lassalle +44 207 952 2000
SOURCE Franklin Mutual Advisers, LLC
LEGAL NOTICE: The information provided here and in the linked letter should not be construed as legal, tax or investment advice or a recommendation or solicitation to buy, sell or hold any investment. The views expressed in the letter are those of the signatories and the comments, opinions and analyses are rendered as at the date of the letter and may change without notice. These views may differ from those of other investment staff within Mutual Series or within other investment management teams of Franklin Templeton which operate with independent investment discretion. Franklin Templeton accepts no liability whatsoever for any loss arising from use of this information or reliance upon any comments, opinions or analyses in the letter.
[1] Market share position noted in 2019 CMD presentation
[2] Sika, Givaudan, RPM International, Symrise, Imerys, H.B. Fuller, Avient, Stepan, Croda International, Ashland, Minerals Technologies, Innospec, Ingevity
[3] Management had established a 17% adjusted operating margin objective at 2019 CMD event
[4] Natural ingredients penetration noted in 2019 CMD presentation
[5] Market share of AP actives noted in 2019 CMD presentation
[6] 2020 goodwill impairment $33.4M, 2021 goodwill impairment $52.3M, 2022 goodwill impairment $103.4M, 2022 property, plant & equipment impairment $23.4M, Elementis’ annual report, note 5 adjusting items
[7] TTM revenue and EBITA excluding $7M of Group costs allocated to Chromium equal to $171M and $21M, respectively, Elementis press release 11/30/2022
[8] Elementis “Response to Mineral Technologies’ Proposal”, December 2020, page 18
[9] Average share price of Elementis from 12/10/2020 – 09/15/2023, Bloomberg
[10] Franklin Mutual Advisers, LLC letter for Mr. John O’Higgins, February 16, 2023
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GCash’s new top-up solution enables direct funding from overseas within digital wallets
MANILA, Philippines and LONDON, Nov. 6, 2024 /PRNewswire/ — Thunes, the Smart Superhighway to move money around the world, today announced a new collaboration with GCash, the leading digital wallet in the Philippines. This ground-breaking initiative enables GCash users to top up their wallet balances directly within the app using funds from their U.K. and European bank accounts. This collaboration makes cross-border top-ups real-time and more cost efficient, offering GCash users in Europe more convenience and financial control.
About 2 million Filipino expatriates live and work in Europe and maintain ties to the Philippines. Those who own a GCash digital wallet can now better support their relatives back home by topping up their wallet instantly, and by ensuring that the money is used as intended, whether for education, healthcare, or household expenses. This innovative initiative highlights the importance that Thunes and GCash place on financial inclusion and community empowerment by helping people improve financial oversight and spending management.
As a Member of Thunes’ proprietary Direct Global Network, leveraging its SmartX Treasury System and Fortress Compliance Platform, GCash enjoys unrivaled speed, control, visibility, protection, and cost efficiencies for their customers’ cross-border account top-ups within their GCash account.
Paul Albano, General Manager of GCash International, said, “We are delighted to be a Member of Thunes’ Direct Global Network, to enable GCash users to top up their accounts instantly from their overseas bank accounts. This service will support hundreds of thousands of Filipinos in the U.K. and Europe by improving how they move money across borders into their digital wallets with better control over their finances. In this way, Filipinos living abroad can better utilize GCash to maintain ties with their home communities.”
Floris de Kort, CEO of Thunes, added, “We are expanding our collaboration with GCash, a long-standing valued Member of our Direct Global Network, to transform digital wallet top-ups. Through Thunes’ Direct Global Network, we are now delivering an instant top-up service that simplifies cross-border transactions. Our alliance with GCash is a testament to our passion for innovation, the versatility of our proprietary network, and our dedication to financial inclusion through money movement around the world.”
Notes to Editors:
Many Filipinos have strong family ties and business relationships back in the Philippines. Filipinos utilize GCash to pay bills, goods and services, friends and family, and obtain financing. The wallet facilitates purpose-driven payments to pay medical bills, housing costs and education.
GCash has helped enable unbanked and underbanked Filipinos take part in the internet and gig economy, spurring financial inclusion.
According to the World Bank, the Philippines has the fourth largest market worldwide for inbound remittances, with $39 billion sent in 2024. In 2024, Europe sent $3.8 billion to the Philippines.
About Thunes:
Thunes is the Smart Superhighway to move money around the world. Thunes’ proprietary Direct Global Network allows Members to make payments in real-time in over 130 countries and more than 80 currencies. Thunes’ Network connects directly to over 7 billion mobile wallets and bank accounts worldwide, as well as 15 billion cards via more than 320 different payment methods, such as GCash, M-Pesa, Airtel, MTN, Orange, JazzCash, Easypaisa, AliPay, WeChat Pay and many more. Thunes’ Direct Global Network differentiates itself through its worldwide reach, in-house SmartX Treasury System and Fortress Compliance Platform, ensuring Members of the Network receive unrivaled speed, control, visibility, protection, and cost efficiencies when making real-time payments, globally. Members of Thunes’ Direct Global Network include gig economy giants like Uber and Deliveroo, super-apps like Grab and WeChat, MTOs, fintechs, PSPs and banks. Headquartered in Singapore, Thunes has offices in 15 locations, including Abidjan, Barcelona, Beijing, Dubai, Hong Kong, Johannesburg, London, Manila, Nairobi, Paris, Riyadh, San Francisco, Sao Paulo and Shanghai. For more information, visit: https://www.thunes.com/
About GCash
GCash is the Philippines’ #1 Finance Super App and Largest Cashless Ecosystem. Through the GCash App, users can easily purchase prepaid airtime; pay bills via partner billers nationwide; send and receive money anywhere in the Philippines, even to other bank accounts; purchase from over 6 million partner merchants and social sellers; and get access to savings, credit, loans, insurance and invest money, and so much more, all at the convenience of their smartphones. Its mobile wallet operations are handled by G-Xchange, Inc. (GXI), a wholly-owned subsidiary of Mynt, the first and only $5 billion unicorn in the Philippines.
GCash is a staunch supporter of the United Nations Sustainable Development Goals (SDGs), particularly UN SDGs 5,8,10, and 13, which focus on safety & security, financial inclusion, diversity, equity, and inclusion as well as taking urgent action to combat climate change and its impacts, respectively.
Photo – https://mma.prnewswire.com/media/2549551/Thunes_GCash.jpg
View original content:https://www.prnewswire.co.uk/news-releases/thunes-and-gcash-launch-innovative-cross-border-digital-wallet-top-up-solution-302296854.html
Fintech PR
UnionPay International joins forces with industry players to optimize payment experience for international visitors to China
Global UnionPay Cards Now Support Weixin Pay and Alipay
SHANGHAI, Nov. 6, 2024 /PRNewswire/ — UnionPay International (UPI) announced that Alipay and Weixin payments are fully enabled for UnionPay cards issued outside China’s mainland, providing more diversified, convenient and inclusive payment options for inbound travelers to China. The collaboration with Weixin Pay is supported through the Industrial and Commercial Bank of China (ICBC).
In order to further optimize payment services, UnionPay launched Project Excellence 2024 in March, joining hands with various industry stakeholders to build a convenient, inclusive, and accessible payment ecosystem. This collaboration is the latest achievement of the Project. From now on, international travelers to China can download Alipay or Wexin applications, link their local UnionPay cards, and enjoy the same convenience of QR payments as the Chinese users do.
This innovative payment method will provide more convenience for inbound visitors to pay in China: No service fee will apply throughout the payment process as initial promotion, which enables users to make payments as if they were at home. Online and offline use cases are covered, including F&B, accommodation, transit, sightseeing, shopping and entertainment. The new method supports consumer-presented, merchant-presented, in-app payment and ETC, which removes the payment barriers for users who are travelling, working or living in China. The new enablement is easy to use, as cardholders only need to enter the UnionPay card information required, and complete the linking process once the card issuer performs the authentication.
This collaboration manifests UPI’s stepped-up efforts to work with other industry stakeholders to promote payment interoperability and develop a sustainable business model. It will help to further bridge the differences in payment preference between China and the rest of the world, facilitate the country’s high-standard opening up.
UnionPay’s international business has become increasingly localized in the past few years, and more and more consumers outside China are enjoying the convenient services brought by UnionPay. Over 250 million UnionPay cards have been issued in 83 countries and regions outside China’s mainland, which can be used for payments in 183 countries and regions. UnionPay has also launched SplendorPlus, a new card product tailored to international visitors to China. The themed card, which comes with diverse benefits and special merchant offers in China, has proven to be highly popular.
View original content:https://www.prnewswire.co.uk/news-releases/unionpay-international-joins-forces-with-industry-players-to-optimize-payment-experience-for-international-visitors-to-china-302296691.html
Nium becomes first fintech to join the blockchain-based network, enabling faster cross-border payments, added market reach, and greater transaction transparency
SINGAPORE, Nov. 5, 2024 /PRNewswire/ — Nium, the leading global infrastructure for real-time cross-border payments, today announced a partnership with Partior, the blockchain-based fintech for clearing and settlement at the Singapore Fintech Festival 2024. The partnership makes Nium the first fintech payment service provider (PSP) on the Partior network. Financial institutions will be able to connect with Nium via Partior for 24×7, transparent, real-time payouts, clearing, and settlement to over 100 markets worldwide. Importantly, the connection will require no additional API integration work, streamlining what historically took months of resource-intensive work.
This new partnership builds on Nium’s recent strategy to connect more networks to its real-time payments’ infrastructure. By joining the Partior network, Nium is extending its connectivity to one of the most innovative networks in the industry. Partior’s blockchain-powered platform effectively resolves longstanding inefficiencies in global payments, such as settlement delays, high costs, and limited transaction transparency. In today’s global landscape, where companies operate around the clock, effective liquidity management is essential for both corporate and financial institutions. This collaboration allows Nium to offer its clients the ability to execute real-time multi-currency payments and Payments versus Payments (PvP) settlements, further simplifying access to its global payments network.
“Nium’s partnership with Partior brings us closer to becoming the most connected payments network globally. By integrating with advanced networks, such as Partior, we are ensuring that financial institutions can quickly and easily access our real-time payments infrastructure without the need for complex technical integrations,” said Alexandra Johnson, Chief Payments Officer at Nium. “Recognizing how resource-constrained financial institutions are, we’re eliminating barriers to using our network and increasing interoperability to deliver on our mission of having seamless and streamlined real-time payments to anyone, anywhere.”
Humphrey Valenbreder, Chief Executive Officer at Partior said, “Partnering with Nium marks a significant step in our journey to further advance the global payments landscape. By combining Partior’s real-time blockchain settlement network with Nium’s vast global reach, we’re empowering financial institutions to break down long-standing barriers. Imagine a world where cross-border payments are instantaneous, transparent, and accessible to all. This is the future we’re building together.”
As part of its continued expansion, Nium’s partnership with Partior enhances its ability to facilitate frictionless global transactions and unlock new services such as intra-day FX swaps, cross-currency repos, programmable enterprise liquidity management, and Just-in-Time multi-bank payments for financial institutions worldwide.
Nium’s growing network, supported by these strategic partnerships, is setting a new standard for how financial institutions can access and benefit from global payments, paving the way for a more efficient and transparent financial ecosystem.
About Nium
Nium, the leading global infrastructure for real-time cross-border payments, was founded on the mission to deliver the global payments infrastructure of tomorrow, today. With the onset of the global economy, its payments infrastructure is shaping how banks, fintechs, and businesses everywhere collect, convert, and disburse funds instantly across borders. Its payout network supports 100 currencies and spans 220+ markets, 100 of which in real-time. Funds can be disbursed to accounts, wallets, and cards and collected locally in 40 markets. Nium’s growing card issuance business is already available in 34 countries. Nium holds regulatory licenses and authorizations in more than 40 countries, enabling seamless onboarding, rapid integration, and compliance – independent of geography. The company is co-headquartered in San Francisco and Singapore.
About Partior
Partior, the blockchain-based fintech for clearing and settlement, is redefining the way value moves globally. Founded in 2021, Partior is backed by founding shareholders DBS, J.P. Morgan, Standard Chartered, and Temasek, and Series B lead investor Peak XV. Partior is addressing the operating inefficiencies experienced by industry players, including settlement delays, limited transaction transparency and high operating costs, and facilitates the movement of liquidity for financial institutions and their customers. Its network offers real-time multi-currency payments, and Payments versus Payments (PvP) settlement. Additionally, it is exploring new services including Intra-day swaps, Delivery versus Payments (DvP) settlement and enterprise solutions.
Logo: https://mma.prnewswire.com/media/1678669/5007806/Nium_Logo.jpg
View original content:https://www.prnewswire.co.uk/news-releases/nium-and-partior-partner-on-real-time-cross-border-payments-clearing-and-settlement-302296465.html
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