Shares in Elementis PLC (LON:ELM) took a bath after the speciality chemicals company proposed to spend US$600mln on the acquisition of a talcs additive producer.
The company has agreed to buy Mondo Minerals, and will finance the acquisition through a US$280mln rights issue and new committed debt facilities of US$775mln.
READ: Elementis shares rise as chemicals firm reports ‘solid’ start to the year
Mondo, which is currently owned by Advent International, is a leading integrated producer of industrial talc additives, based in the Netherlands.
In 2017, Mondo generated revenues of €122mln and underlying earnings (Ebitda) of €31mln with an Ebitda margin of 25%. Elementis believes Mondo's business has attractive growth prospects and is showing good momentum in the current year.
The acquisition is expected to immediately enhance Elementis’s earnings and strengthen its position as a leading additives company.
Global Super Fine Talc Powder Market Leading Players, Product Types and Applications by 2023: IMI FABI(IT), Imerys(US), Specialty Minerals(US) and Mondo Minerals(NL) https://t.co/pozRDtvHxt pic.twitter.com/eo6nnW2K7M
— Robert Martin (@generalcriticsm) June 26, 2018
"This is a very compelling opportunity for Elementis and an exciting step in the development of the business," claimed Paul Waterman, the chief executive officer of Elementis.
"Since we launched the Reignite Growth strategy at the end of 2016, Elementis has been on a journey to transform its portfolio and focus on high-value growth businesses with structural competitive advantages and attractive financial characteristics. Mondo is an excellent fit and we see significant opportunities to apply Elementis' global knowledge, scale and relationships to unlock additional value and further growth," he added.
Shares in Elementis were down 6.3% at 266p in mid-morning trading.