LONDON, June 25, 2024 /PRNewswire/ --
24 June 2024
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,
As you know, Gatemore Capital Management LLP ("Gatemore" or
"we") manages the Gatemore Special Opportunities Fund ("GSOF" or
the "Fund"), which currently holds an economic interest of over 4.5
million shares in Elementis PLC ("Elementis" or the "Company").
Continued Lack of Action
Following a series of private discussions, in our open letter
published on 29 April 2024, we
highlighted numerous missteps by the current management concerning
capital allocation and operations, which have undermined investor
confidence in the Company and resulted in a significant gap between
Elementis' intrinsic value and its share price. We also proposed
several urgent actions to rectify Elementis' issues, urging the
Board to take decisive steps to drive meaningful change.
We were disappointed to read the Company's formal response,
which we considered to be wholly inadequate as it merely reiterated
the Company's existing, ineffective strategy without addressing any
of our concerns. We also note it was released only a few hours
after our letter was published, implying not only hastiness, but
also a fundamental unwillingness to engage with the critical issues
at hand.
In light of this, we are reiterating today our firm belief that
accelerating the cost-savings program, replacing the current CEO,
and conducting a strategic review — including a potential disposal
of the Talc business — are essential to improving the Company's
performance and unlocking shareholder value.
Since our open letter we have continued to engage with other
active shareholders who closely follow the Company's trajectory. We
believe that the majority of top active shareholders share our
sentiment, are disappointed with the ineffective engagement from
the Company, and support the actions we recommended in our
letter.
Share Sale by Overpaid CEO Raises Further Concerns
In our public letter, we emphasized the misaligned interests
between the Board and the shareholders, which we believe accounts
for the Board's chronic passivity. Indeed, the Non-Executive
Directors of Elementis collectively hold less than 0.05% of total
shares outstanding, worth approximately £397k, while earning
approximately £526k per annum in Board fees[1]. This misalignment
of interests is unfortunately common in UK PLCs, where boards are
often disincentivized from acting decisively and with appropriate
urgency for the benefit of shareholders.
Adding to our concerns, on 30 May
2024, we learned that CEO Paul
Waterman sold 350,000 shares, or approximately 18% of his
total vested holding[2] in the Company, for total proceeds of
£523k[3], leaving him with only 1.6 million shares[4], or about
0.3% of the total shareholding. This sale of shares by the CEO at
such a critical time for Elementis is tone-deaf in the context of
extensive cost cuts. Furthermore, it sends an extremely poor signal
to shareholders on the CEO's views on the future prospects of the
business. Rather than inspiring confidence in his leadership or
judgement, the sale raises new questions about his suitability to
remain in office and commitment to effectively leading Elementis
toward a more prosperous future.
We believe in strong rewards for strong performance. Yet since
the start of Waterman's tenure eight years ago, the Board has
decided to reward him with over £14 million in total compensation,
all while Elementis' share price has underperformed its sector by
76 percentage points[5]. Most perplexing is that last year, even
with the hindsight of obvious mistakes made by the current
management, the Board nonetheless chose to reward the CEO with
record level of compensation.
We would add that this compensation is also entirely
disproportionate to the current total value of the CEO's
shareholding at £2.3 million[6]. This significant disparity is
alarming and suggests that the CEO's interests are increasingly
divorced from those of the shareholders he is supposed to
serve.
The decisions made by the Board around the CEO's compensation
underscore the divergence between the Board's priorities and the
interests of the shareholders whom the Board is supposed
represent.
Time for Action
The time is now for the Board to take immediate and decisive
actions to address these governance concerns and realign the
Company's strategy with the interests of its shareholders. We have
engaged with many of the largest active shareholders of Elementis
and believe there is unity on all these issues. We strongly
urge you and the Board to take prompt and decisive action.
Failing this, we may be compelled to unite the shareholders and
pursue the replacement of the Chairman through an Extraordinary
General Meeting to drive the necessary change within Elementis.
As always, we are committed to engaging constructively with the
Board to ensure the full value of Elementis is achieved and would
be glad to speak further privately. Thank you for your
attention.
Sincerely,
Liad Meidar
Managing Partner
Gatemore Capital Management LLP
For media enquiries:
Greenbrook
Rob White, Teresa Berezowski
Email: gatemore@greenbrookadvisory.com
Tel: +44 (0) 20 7952-2000
Disclaimer
Gatemore Capital Management LLP, together with the funds it
manages ("Gatemore") is acting on behalf of itself and not as agent
for or on behalf of any third party. This letter is not intended
as, and should not be construed as, an offer or invitation or
solicitation with respect to the purchase or sale of, or a
recommendation to invest in, any security. The content of
this letter has been prepared by Gatemore alone and is not, and has
not been, endorsed or approved by any other person. You should
assume that, as at the date hereof, Gatemore may have a position
(long or short) in one or more of the securities of any company
mentioned in this document (and/or options, swaps and other
derivatives related to one or more of these securities) and may
continue transacting in such securities.
This letter is not, and should not be regarded as investment,
accounting, legal or tax advice or as a recommendation regarding
any particular strategy. No reliance may be placed for any
purpose on the information and opinions contained in this letter or
their accuracy, sufficiency, or completeness. No
representation or warranty, express or implied, is or will be made,
and, save in the case of fraud, in no event will Gatemore or any of
its directors, officers or employees, advisers, agents,
consultants, affiliates, and/ or any funds managed by Gatemore be
liable to any person (in negligence or otherwise) for any direct,
indirect, special, consequential or other damages arising from any
use or misuse of the content or information provided herein.
Certain information in this letter constitutes "forward-looking
statements", which can be identified by the use of forward-looking
terminology such as "may", "will", "should", "expect",
"anticipate", "target", "project", "estimate", "intend",
"continue", or "believe", or the negatives thereof or other
variations thereon or comparable terminology. By their
nature, forward-looking statements involve risks and uncertainties,
actual events or results may differ materially from those reflected
or contemplated in such forward-looking statements.
[1] Holding value based on Elementis 2023 Annual Report and
RNS announcements and market capitalisation of £850m as of
21 June 2024. Non-Executive Board
compensation per Elementis 2023 Annual Report.
[2] Based on 1.6m resulting CEO
shareholding in the Company post sale as per Elementis' email to
Gatemore dated 31 May 2024.
[3] Elementis RNS announcement dated 30
May 2024.
[4] CEO shareholding in the Company post sale as per Elementis'
email to Gatemore dated 31 May
2024.
[5] Bloomberg as of 21 June 2024.
Total Return Index (Gross Dividends). Sector peer performance is
based on is a simple average TSR of Ashland, Arkema, Imerys, Evonik
and Lanxess.
[6] Holding value based on 1.6m
shares and market capitalisation of £850m as of 21 June 2024. CEO compensation per Elementis 2016
- 2023 Annual Reports.
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