Morgan Advanced Materials (MGAM) has rejected a takeover approach from fellow materials specialist Vesuvius (VSVS), claiming that it “fundamentally undervalued” the company and would expose shareholders to lower-margin business in the iron and steel sector.
Vesuvius, which makes ceramic moulds and linings for steelmakers and foundries, made the offer just weeks after Morgan's shares dropped on news that its long-standing chief, Mark Robertshaw, will leave in the new year. Formerly part of Cookson, Vesuvius has been struggling with an industry downturn in Europe and North America and saw the potential £2bn merger as an opportunity to create a higher-margin global leader in advanced ceramics technology.
Now that the approach has been rejected and abandoned, however, Vesuvius is unable to make an offer for the next six months, unless Morgan’s board permits it or a third-party bidder emerges.
Analysts at Investec were unsurprised that Morgan turned its back on the proposal given its higher-margin business and avoidance of Vesuvius’s more cyclical end markets. David Larkarm at Numis, meanwhile, ruled out the possibility of a higher bid from Vesuvius as any premium would cede too many of its targeted savings – he believes the financial rational was based on cost saving potential of about £41m.
