Embattled Elementis CEO to step down

UK-based speciality chemicals company Elementis has announced that, by mutual agreement, CEO Paul Waterman will step down no later than the AGM in April 2025, remaining available as required for any transition or other support until the end of July. A successor is now being sought.

The company said that Waterman “will be treated in accordance with the company’s remuneration policy and his service agreement for the remaining term of his contract. Full details of this will be disclosed on the website “in due course”, it added. Waterman has led Elementis for nearly nine years since taking the role in 2016.

Over the past 12 months, the company has come under pressure from ‘activist’ shareholders over the past 12 months, with some demanding that he be replaced. In November 2023, Franklin Mutual Advisers published an open letter to board chairman John O’Higgins, calling for Elementis to put itself up for sale. It accused the company of “a shocking amount of shareholder value destruction”, mainly as a result of recent acquisitions.

This pressure increased in April2024, when Gatemore Capital Management published a similar letter, stating that there was a huge gulf between the firm’s fundamental strengths and its “persistently weak share price”. Having failed to get anywhere by engaging with the board, it said that was going public about how Elementis should act “to rebuild investor confidence and unlock significant value for its shareholders”.

Under Waterman, Gatemore contended, Elementis had total shareholder returns 86% lower than its peers and 76% lower than the FTSE 250, despite three takeover approaches boosting the share price. Elementis responded that: “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.”

In July, Gatemore published a second letter, describing this as “wholly inadequate”. It called for the cost-savings programme to be accelerated, Waterman replaced and a strategic review, including a potential disposal of the Talc business. Failing this, it would look to join other shareholders to push through the changes it wanted. It also noted that Waterman had sold 350,000 shares in the company, which it called “tone-deaf in the context of extensive cost cuts” and sent “an extremely poor signal to shareholders on the CEO’s views on the future prospects of the business”. Over the course of 18 years at Elementis, Gatemore noted, Waterman had earned £14 million.

Gatemore welcomed the announcement of Waterman's departure saying it "marks the implementation of the third step we called for". The others were already announced in August, though the outcome with regard to the Talc business remains to be seen. "Additionally, we remain actively engaged with fellow shareholders to ensure the optimal composition of the board and to determine who is best suited to lead the process of selecting a new CEO to drive the company forward," said managing partner Liad Meidar.

Elementis mainly supplies the personal care sector, notably cosmetic and antiperspirant actives; it is the world market leader in the latter field. 85% of its products are of natural origin. Coatings and paper are other key markets.

“Over the past nine years it has been my privilege to lead Elementis as we have transformed the group into a higher quality, more focused speciality chemicals business,” Waterman stated. “The company is now well positioned for future success … I am confident that performance will further improve through 2025 and 2026, making now an appropriate time for a leadership transition.”