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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US$40.9 billion in purchasing contracts signed with 38 partners, bringing the total of seven sessions of CIIE to US$285 billion
SHANGHAI, Nov. 6, 2024 /PRNewswire/ — China Petroleum & Chemical Corporation (HKG: 0386, “Sinopec”) has hosted a forum titled “Building Global Energy Partnerships” and a signing ceremony at the 7th China International Import Expo (CIIE 2024) in Shanghai. The exhibition, running from November 5 to 10, is focused on the global energy transition and fostering an open, green, and low-carbon ecosystem.
At the signing ceremony, Sinopec signed purchasing contracts with 38 partners from 18 countries, which totaled US$40.9 billion, including 27 products from 10 major categories, including crude oil, chemicals, equipment, materials, consumer goods and more. Since the first CIIE in 2018, Sinopec has signed orders exceeding a total of US$285 billion in seven sessions.
Ma Yongsheng, chairman of Sinopec, remarked in a keynote speech at the forum that the global energy supply as well as demand pattern and governance system are in need of real changes, and the transformational development of energy and chemical industry is already in a new stage.
“In the face of the great momentum of development, Sinopec unswervingly commits to promoting high-quality, intelligent, and green development leveraging advanced technologies,” said Ma. “We also understand deeply that the energy and chemical industries can only achieve sustainable development through cooperation. Sinopec has always adhered to open cooperation and achieve mutual wins with all our partners.”
Sinopec aims to enhance collaboration on oil and gas resources, working with various stakeholders to establish a more stable industry alliance. The company is also committed to expanding its green energy initiatives to further its low-carbon transformation goals. Additionally, Sinopec seeks to foster technology partnerships to unite innovative efforts, aiming to create a harmonious balance between humanity and nature, address climate challenges effectively, and build a cleaner, more sustainable world for future generations.
At CIIE 2024, Sinopec also signed cooperation and procurement agreements with a number of companies at the event. It has signed a framework agreement with TotalEnergies on long-term LNG supply, under which TotalEnergies will supply 2 million tons of LNG per year to Sinopec from 2028, for a total of 15 years. The partnership will enable both parties to further explore opportunities across the whole industry chain and promote global energy transformation.
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View original content:https://www.prnewswire.co.uk/news-releases/sinopec-hosts-forum-session-at-7th-china-international-import-expo-302297169.html
BEIJING, Nov. 6, 2024 /PRNewswire/ — International companies looking to enter the Chinese market are flocking to Shanghai to take advantage of the seventh China International Import Expo (CIIE), the country’s biggest import trade fair slated to run from November 5 to 10 this year.
A global economic and trade event, the expo generated deals cumulatively valued at $78.4 billion last year, an increase of 6.7 percent year on year, hitting an all-time high. This year’s CIIE will host 3,496 exhibitors from 129 countries and regions in an exhibition center space that covers over 360,000 square meters – equivalent to 50 standard soccer fields.
According to Chinese officials, the number of participating countries and exhibitors has surpassed previous records. And the most notable thing is that 297 exhibitors are from Fortune Global 500 companies, marking a historic high. Among all participants, 186 enterprises and institutions have participated in the expo for seven consecutive years.
Hosting the CIIE is an important aspect of China’s opening up and cooperation, representing China’s solemn commitment to the world, Chinese Premier Li Qiang said during his keynote speech at the opening ceremony of this year’s CIIE on Monday.
The Piraeus Port Authority, the operator of Greece’s largest port, is participating in the expo for the seventh consecutive year. Following its debut at the inaugural CIIE in 2018, Piraeus Port saw its container throughput hit a record high in 2019, with 40 percent of the total volume coming from China.
“Piraeus Port takes part in the CIIE every year to explore new cooperation opportunities, aiming for a win-win partnership with China,” exhibitor Evdoxia Kastrinelli told CMG, adding the port operator will keep participating in the event in the future.
Apitv, an automotive technology supplier headquartered in Dublin, is participating in the expo for the first time. A part of a global industrial machinery manufacturer with over 100 years of history, the company is showcasing more than 45 cutting-edge technological innovations, including hydrogen energy solutions, liquid hydrogen booster pumps, and other advanced products, all making their debut in China.
“We’ve seen the impact the CIIE has had on global trade over the years, and with China’s automotive industry rapidly advancing, this is an excellent opportunity for us to leverage the platform to engage in deeper cooperation with enterprises both in China and around the world,” said Jiang Weihao, a representative of the exhibitor.
In addition to tech products and consumer goods from developed countries, this year’s expo also welcomed a large number of developing nations, including 37 of the world’s least developed countries. Over 120 exhibition booths were provided free of charge to these countries. Some booths highlight African agricultural specialties such as peanut, coffee, honey and beer.
During the 2024 Summit of the Forum on China-Africa Cooperation, China announced plans to grant zero-tariff treatment on all tariff items for the least developed countries with diplomatic ties to China, including 33 African nations. Following that, 22 tonnes of avocados imported from South Africa cleared customs and arrived at Shanghai Yangshan Port in early October.
Addressing the opening ceremony, Li stressed the need to strengthen consensus on opening up, adding that all parties should jointly adhere to international economic and trade orders and rules and earnestly fulfill multilateral and bilateral economic and trade agreements.
This year, China has rolled out a series of measures to underscore its commitment to deeper reforms and greater openness.
Starting November 8, China will grant visa-free entry to citizens from nine more countries, bringing the total to nearly 30. On November 1, China implemented an updated negative list for foreign investment, removing all restrictions in the manufacturing sector.
The country has also revised policies for foreign investment in listed companies and will now allow foreign-invested hospitals in nine cities. A nationwide negative list for cross-border services trade will also be introduced.
As China continues to open its economy and stimulate growth, the International Monetary Fund (IMF) has raised its growth forecast for China to five percent, matching the country’s original growth target.
Based on IMF projections, Bloomberg has reported that China is expected to remain the largest contributor to global economic growth over the next five years, surpassing the combined contributions of all G7 countries.
China will further expand institutional opening up and actively align with high-standard international economic and trade rules, Li said, pledging efforts to implement the strategy for upgrading pilot free trade zones.
View original content:https://www.prnewswire.co.uk/news-releases/cgtn-china-showcases-commitment-of-opening-up-via-massive-trade-fair-302297127.html
Fintech PR
MODIFI Secures Strategic Investment from SMBC Asia Rising Fund to fuel Asian exports by SMEs
Fintech leader strengthens position in cross-border B2B payments and trade finance, eyeing rapid growth across Asia, including China and India
AMSTERDAM and SINGAPORE, Nov. 6, 2024 /PRNewswire/ — MODIFI, a leading global platform in B2B Buy Now, Pay Later (BNPL) solutions, today announced the successful completion of a $15 million funding round led by SMBC Asia Rising Fund with participation from existing investors Maersk, IntesaSanPaolo, Heliad and other top-tier global investors. Sumitomo Mitsui Banking Corporation (SMBC), one of Japan’s leading banks and a major financial force in the APAC region, brings both capital and strategic alignment to the partnership. Beyond the equity investment, MODIFI and SMBC have signed a Memorandum of Understanding (MoU) to jointly advance digital solutions that support SME exporters across Asia in expanding their international trade operations. Through a series of joint initiatives, MODIFI and SMBC aim to empower SMEs with innovative cross-border financing solutions.
The announcement comes on the sidelines of Singapore Fintech Festival, showcasing MODIFI’s drive for innovation in the global fintech landscape. This new capital infusion will accelerate MODIFI’s expansion, particularly in high-growth markets like China and India, where the company has already made significant inroads. MODIFI’s platform delivers critical liquidity and flexible payment terms to small and medium-sized enterprises (SMEs), helping them optimize cash flow and expand their international reach.
“The funding underscores the strength of our business and the confidence our investors have in our vision for the future,” said Nelson Holzner, CEO and Co-founder of MODIFI. “As global commerce evolves, MODIFI is at the forefront, providing innovative solutions that empower businesses to scale and succeed across borders.”
MODIFI’s exponential growth has solidified its position as a market leader in cross-border payments and trade finance. Recognized by Financial Times and Statista as one of the Fastest Growing European Fintech Companies in 2024, MODIFI has facilitated over $3 billion in global trade for more than 1,800 companies since it was founded in 2018. The platform offers instant working capital approval, alongside integrated risk management tools that shield businesses from buyer defaults and fraud.
“Our mission is simple: We empower SMEs to compete and thrive in the global market with fast, flexible, and secure payment solutions,” added Holzner. “With this fresh funding, we’re set to redefine global trade finance—ensuring businesses of all sizes can unlock the liquidity and get the protection they need to grow internationally.”
“By transforming cross-border supply chain finance for the digital age with their global presence, we believe MODIFI supports SMEs to scale their export businesses with ease. We look forward to collaborating with MODIFI to empower our corporate clients to expand their businesses globally with agility and financial flexibility overcoming traditional trade barriers,” said Keiji Matsunaga, General Manager of Digital Strategy Department, SMBC.
About MODIFI
MODIFI is redefining global trade finance as a leader in B2B Buy Now, Pay Later (BNPL) solutions. Trusted by businesses across 55+ countries, MODIFI provides cutting-edge tools that optimize working capital and streamline cross-border payments. Through its extensive global network, MODIFI delivers fast, flexible, and secure financial solutions, helping companies expand their international footprint with ease. By integrating advanced risk management features and seamless payment processes, MODIFI is setting new benchmarks in global commerce, empowering businesses of all sizes to thrive in a rapidly evolving market.
About SMBC and SMBC Asia Rising Fund
SMBC, one of the leading banks in Japan, co-funded SMBC Asia Rising Fund with Incubate Fund which is a corporate venture capital fund, for the purpose of accelerating business development and partnerships through investments in high potential start-ups operating actively in Asia. Through this fund, SMBC Group will enhance its business and provide clients with new solutions by uncovering/ applying new technologies via partnerships with investee firms and the development of new business models and products.
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View original content:https://www.prnewswire.co.uk/news-releases/modifi-secures-strategic-investment-from-smbc-asia-rising-fund-to-fuel-asian-exports-by-smes-302297108.html
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