Elementis plc (LSE:ELM) shares gained 5.7% on Tuesday after the specialty chemicals group finalized the divestment of its pharmaceutical manufacturing division to Associated British Foods.
The transaction was completed at an enterprise value of €34.3 million (approximately $39.8 million), generating net cash proceeds of around €30 million (approximately $35 million) after accounting for transaction-related costs.
Share Buyback Planned Following Disposal
Elementis announced that it intends to return the entire $35 million of net proceeds to shareholders through a share repurchase programme, which is expected to begin as soon as practical.
The decision reflects the board’s confidence in the company’s financial position and follows a period of solid trading performance. Management pointed to a strong balance sheet, encouraging first-quarter results and an unchanged outlook for the current year as key factors supporting the capital return initiative.
Focus Shifts to Core Specialty Chemicals Operations
The disposal marks an important strategic step for Elementis, transforming the company into a pure-play specialty chemicals business focused on specialty additives serving the Personal Care and Coatings markets.
Management believes the transaction will enhance the quality of the company’s portfolio while allowing greater focus on its core operations. The sale is also expected to improve adjusted operating margins at both the group level and within the Personal Care division, while lowering future capital expenditure requirements.
“The Transaction further strengthens the quality of our portfolio and sharpens our focus on our core markets,” said Luc van Ravenstein, CEO of Elementis.
Associated British Foods Acquires Growth Platform
Elementis said the pharmaceutical manufacturing business will benefit from being part of Associated British Foods, which offers an established global pharmaceutical platform and longstanding customer relationships.
Management believes the new ownership structure will provide the business with additional opportunities for growth while allowing Elementis to concentrate resources on its higher-priority specialty chemicals operations.
The company previously updated investors on trading performance in a statement released on April 29 and has maintained its outlook for the remainder of the year.
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