After a rejection by the company’s board, an engineering group named Vesuvius deserted the approach for its merger with its rival Morgan Advanced Materials.
Vesuvius had offered an all-share merger between the two companies and this would have created a deal of almost £2bn – becoming a higher margin leader in the advanced materials and ceramics technology.
Nevertheless, the timing of the announcement by Vesuvius made Morgan Advanced Materials very curious. The company said that the bidder had already approached the company earlier on 27th October with a nil-premium proposal.
Vesuvius’s proposal is considered as an opportunity because it was introduced after the drop in Morgan’s shares and after Mark Robertshaw said he would leave the business around the New Year.
An analyst at Investec said that they are not surprised with Morgan’s disloyalty on the overall approach. Morgan regards itself higher in margin business.
Vesuvius was a part of Cookson until the entire electronics sector was separated in 2012. It is a disappointment to see that both sets of shareholders lack the opportunity to explore the incremental value further because the proposal was rejected.
Morgan said nil-premium proposal was thoroughly reviewed by the members of the board and they concluded that the proposal significantly undervalued the Morgan Advanced Material’s business and future prospects.
According to the members of the board the proposal would have diluted the company’s shareholders’ exposure to secular growth markets and lower margin businesses in the iron and steel sectors, said the company in a stock exchange announcement statement.
Andy Douglas, Jefferies said the company has been undergoing considerable activities in this business sector (with Ceradyne and Ceramtec being opted out). However, with Morgan currently looking for a new Chief Executive position, it is some interesting times for the company to consider.
The company is blocked for another six months for reproaching the Morgan.
Morgan Advanced Materials shares closed up up 2.95pc to 300.4p and those of Vesuvius declined 3.9p to 412.5p.