More activity imminent in speciality chemicals sector

Elementis, formerly Harrisons and Crosfield, looks a likely target again as management split over strategy and CEO leaves.

With the recent flurry of private equity activity around Henkel AG and its speciality chemicals division Cognis that culminated in Schroder Ventures appearing as the successful bidder, news that the top management at UK speciality chemicals producer Elementis are at odds about the company's future suggests that it will once again become a target for several private equity firms.

Things have come to head at Elementis, formerly known as Harrisons and Crosfield, with CEO Lyndon Cole resigning in the face of board opposition to his plans to grow the company independently. He is being temporarily replaced by Chairman Jonathan Fry.

Having pared back its businesses over the past three years to focus on higher margin and less cyclical speciality chemicals, the company now seems to be at a crossroads. The Financial Times reports that Elementis is thought to have been planning acquisitions in the chromium and rheology speciality chemical sectors. It also states that the management is split over whether to sell its leather and pigments division. Fry is reported as saying that its chemicals distribution business had also been considered for sale but the environmental liabilities connected to it made such a sale unlikely.

At the end of last year it was rumoured that several private equity firms, including Advent International, had approached Elementis, prompting a surge in its share price to over £1. A subsequent statement from the company that a bid would value the company at less than a £1 per share saw the price fall and in May the company announced that negotiations had halted on account of unacceptably low valuations.

Analysts were struck at the news of Cole's departure, in part because he had been instrumental in rationalising the company's activities and in part because several predicted that Cole would make an obvious partner to a private equity bid.