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SEP / OCT 2024
Summer heat
The summer is rarely a time for major news announcements in the chemicals industry and this year was not much different . However , plenty has been going on when it comes to conflicts between companies and investors and the latter have not been holding back .
On 24 June , Pennsylvania-based ‘ activist short seller ’ Muddy Waters announced it was short on diagnostics and lab testing group Eurofins Scientific “ because the confusion and contradictions inherent in its financials and operations cause us to believe that it is optimised for malfeasance , rather than for conventional business ”.
Referring to Eurofins CEO Dr Gilles Martin , who owns about one third of the company , chief investment officer Carson Block said : “ At best , Eurofins has a parasitic controlling shareholder who has been siphoning money from the company for two decades . Our view , however , is that Eurofins ’ financials could contain material overstatements of profits , cash balances and other asset values .”
Among many other things , Eurofins was implicitly accused of avoiding disclosure requirements by only making small acquisitions , reclassifying € 682 million of receivables and payables in the 2022 accounts and paying Martin much more than it should have been if it was not buying real estate . The implication is that Martin has siphoned money to fund his real estate empire .
In response , Eurofins said that all of the allegations and insinuations are “ either inaccurate , irrelevant , biased and / or misleading ”. Muddy Waters , it said , has never participated in its investor events or directly engaged , and indeed stands to gain from a fall in the company ' s share price . This did indeed happen immediately after the report ; there has been a rally since , though the price is still on the low side .
Another long-running war of words , between UK-based speciality chemicals Elementis and activist shareholder Gatemore Capital Management , also accelerated over the summer . On 25 June , Gatemore published a second open letter to chairman John O ’ Higgins , describing the board ’ s response to its first one in April as “ wholly inadequate , as it merely reiterated the company ' s existing , ineffective strategy without addressing any of our concerns ”.
Gatemore argues that accelerating the ongoing cost-savings programme , replacing CEO Paul Waterman and conducting a strategic review , “ are essential to improving the company ' s performance and unlocking shareholder value ”. It reiterated its concern about a “ misalignment of interests ” between the board and shareholders , ultimately warning that it may seek an extraordinary general meeting “ to drive the necessary change within Elementis ”.
Elementis has not directly responded . Instead , it said : “ The board continues to believe that shareholder value is best driven by a focus on delivering the substantial actions that are currently being progressed at pace throughout the business and that underpin progress towards the 2026 targets .” There has been nothing further in the past month or so , but it is a racing certainty that this will not appease the critics - for Gatemore is not alone in its antagonism towards the current strategy .
Battles between management and ‘ activists ’ in the financial sector are nothing new , of course , but the stakes seem to be getting higher . Whether you view the latter as agents of positive change shaking up complacent boards or opportunist sharks – I know what I think – their determination to force change and their willingness to make savage criticism has never been more evident . No doubt we can expect plenty more in an industry that never stands still very long .
Dr Andrew Warmington
EDITOR – SPECIALITY CHEMICALS MAGAZINE
SPECCHEMONLINE
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