Cookson is dead, in name at least. The fast-growing performance materials division - Alent (ALNT) - has finally been cut loose and the remaining business making pipes, valves and furnace linings for the steel industry is renamed Vesuvius (VSVS). Shareholders now own an equal stake in both companies and, initially at least, the trick of unlocking value looked to have worked.
Alent and Vesuvius both traded above 340p in early trade, a 5 per cent premium to the previous session's closing price. The euphoria, however, was brief and the pair soon reverted to type and what looks to be fair value. Superior growth prospects mean Alent gets the premium rating, yet at 306p the shares trade on less than 12 times UBS's earnings forecasts for 2013, a discount to the UK speciality chemicals sector and peers such as AZ Electronic Materials, both on a forward PE ratio of 14. Alent certainly looks to have more appeal. It's the sexy, fast-growth, high-margin operation, supplying solder and electroplating chemicals for smartphones and tablet devices made by Apple, Lenovo and Samsung. It's also been working with Google and on Microsoft's X-Box. In fact, the electronics industry, much of it in Asia, will account for three-quarters of revenue next year. Motor manufacturers will make up the rest, and sales of American and German luxury brands, each one loaded with about $2,000-worth of electronics and growing, are offsetting weakness in Europe. Alent's coatings that prevent underwater drilling equipment from rusting are popular among oil explorers, too.
Takeover talk is already doing the rounds, and with good reason. Rival MacDermid already has a private equity owner and Alent certainly ticks all the boxes. It's even shed the pension problem that haunted Cookson for years - the bulk of the deficit is going with Vesuvius, a legacy of Britain's once proud steel industry. Vesuvius takes the blame for October's third-quarter profits warning, so annual results will not make pleasant reading. The outlook probably won't, either. On current forecasts, the shares trade on 10 times earnings, which looks realistic given analysts expect little or no growth next year. But Vesuvius is highly geared to any upturn in steel demand among its blue-chip client list, and a prospective dividend yield above 4 per cent puts Alent in the shade.
