The Times - UK (2020-11-26)

the times | Thursday November 26 2020 1GM 41

Business

favour of selling the company to a price

comparison competitor. “I think it

would be a complete waste of time. All

you’d do is make a lot of people redun-

dant and save money,” he said.

Matthew Earl, managing partner of

Shadowfall, argued that yesterday’s

share price fall showed that investors’

confidence in the publisher’s growth

could be wavering. “The way the

market has reacted, it seems as though

investors are finally working out that

Future’s growth is largely reliant upon

it acquiring bigger businesses,” he said.

A second approach from an American

suitor has been rejected in double-

quick time by Elementis.

The speciality chemicals group said

yesterday that the 117p-a-share take-

over proposal from Minerals Tech-

nologies “significantly undervalued”

the business and its prospects. Ele-

mentis had rejected a 107p-a-share

approach from the New York-listed

company earlier in the month.

Minerals Technologies said that

Elementis had declined the latest ap-

proach after only two hours and had

“declined to enter into discussions”.

The British company mines and pro-

duces speciality chemicals such as talc,

chromium and hectorite that are used

Change of tune isn’t

so drastic after all

A

t last a new job for Gio

Compario, the Welsh-

Italian warbler. He’s

landed himself a shock

Future: joining the

publisher of Classic Rock, Airgun

Shooter and Practical Caravan. Sign

up now for his death metal tour of

Britain’s mobile home spots.

But why, you ask, is Future buying

Gio? Good question, at least to

judge by the 17 per cent dive in its

shares to £16.34 on the news it was

acquiring the owner of the

Gocompare price comparison site

for £594 million in cash and shares.

Future said the 136p-a-share deal to

buy Goco was struck at a 23.6 per

cent premium. But only 33p of that’s

in cash. So by the end of the day the

bid had been repriced at 119p: a

mere 8 per cent premium. Goco

shares closed up 6 per cent at 116½p.

True, as Goco chairman Sir Peter

Wood — of Direct Line and Esure

fame — pointed out, some of the

share price reaction was down to

hedge funds and arbitrageurs

switching out of Future and into

Goco. It was something he was

“expecting”, he said, calling the

recommended bid “a great deal. I’m

not worried about the price.” But it

was also down to Future boss Zillah

Byng-Thorne blindsiding investors

with a left-field buy that is “sure to

have surprised many”, as Jefferies’

analysts put it.

That Ms Byng-Thorne was on the

board of Goco, a non-exec since

September 2017, raised more

questions. But she’s got a decent

spiel for the deal detractors. And

defying critics is her thing, as she’s

proved by taking charge of a sub-

£100 million group in April 2014 and

turning Future into a highly rated

£1.6 billion group. And all by buying

declining print titles, adding digital

zip and driving up margins and

cashflow.

The result? What she calls a

platform business for “specialist

media that drives intent”: an odd

phrase that broadly means intent to

buy stuff. Readers of titles also

spanning PC Gamer and Homes &

Gardens and the website Techradar

want advice on gadgets to buy or

cost-saving tricks for the house. So

why not also direct them via

Gocompare to the best deals for

faster broadband, energy saving and

home insurance, take a cut and

bank £10 million of annual cost

synergies? Goco also owns the Look

After My Bills switching service and

My Voucher Codes offers unit: the

bedrock she hopes of a personal

finance wing.

So, despite the reaction, the deal’s

less of a strategic shift than appears.

Nor is it as cosy as it looks. She says

she “had no involvement” in putting

it in front of Future’s board, chaired

by Richard Huntingford. It was the

result of a market study by strategy

chief Penny Ladkin-Brand. To boot,

Ms Byng-Thorne recused herself

from Goco board meetings on the

deal.

Even so, Future’s only just bought

magazine publisher TI Media for

£140 million. So the deal will again

muddy the accounts at a group built

via an acquisition roll-up: a business

whose organic growth rate was

damned in February by short-seller

Shadowfall in a 68-page critique. It’s

a document Sir Peter has trawled

through, given that Goco is taking a

big slug of Future shares, not least

with him “irrevocably” backing the

deal with his own near-30 per cent

stake. He says he found nothing of

“any significance”. But you can see

why both sets of investors could be

jumpy. The deal may well succeed.

But it’s a bit early to be planning

Gio’s caravan tour.

Bare bones

A

strategy to “put the calcium

in our national bone

structure and the collagen in

our national skin tissue”. What sort

of health-freak quackery is this?

Answer: the UK’s latest

infrastructure blueprint, as told by

Boris Johnson. What will be his next

fix for broken-down Britain? Botox?

Still, at least his 100-page National

Infrastructure Strategy has finally

arrived. And the general direction of

travel is fine. It’s just there’s a lack of

detail, except for the £7.1 billion

homebuilding fund and one less

welcome eye-catcher: that Rishi

Sunak’s spending review

backtracked on promises that all of

the UK would be linked to gigabit

broadband by 2025. That fantasy’s

been cut to 85 per cent, delighting

rural voters. Elsewhere, a £4 billion

“levelling up” fund for Red Wall

projects of up to £20 million at least

shows understanding that it’s not

the mega-schemes that count

locally. Even so, it comes with

cronyism risk over selected projects.

And if the PM was serious about

levelling up, he’d demand faster

progress on rail links to the biggest

cities in the north.

As for the new infrastructure

bank, something has to replace the

funding lost to Brexit from the

European Investment Bank: about

€120 billion since Britain joined the

EU in 1973. But, as the Association

for Consultancy and Engineering

noted: “We already have access to

finance; what we are lacking is the

appetite from government to deploy

it and investible opportunities.” The

Investment Association, whose

members manage £8.5 trillion assets,

said it was “committed” to “playing

a key part”. But private capital needs

clearly specified projects without

political risk. Collagen only gets you

so far.

Elementary decision

J

ust “two hours”. That’s all it took

for chemicals outfit Elementis

to reject the latest “conditional

proposal” from rival Minerals

Technologies. Or that, at least, is

what the US suitor is moaning

about. But what does it expect?

It may have upped its possible

cash bid from 107p to 117p, valuing

the business at £680 million. But

Elementis shares topped 180p in

January. And even if its biggest

shareholder, APG, of the

Netherlands, has been selling below

the mooted bid price, the board’s got

a case that it “significantly”

undervalues the group. Rejecting

117p was pretty Elementis.

[email protected]

business commentary Alistair Osborne

Future

share price

2013 14 15 16 17 18 19 2020

£20

15

10

5

0

Techradar

Tom’s Hardware

T3

Country Life

Horse & Hound

Golf Monthly

TopTenReviews

PC Gamer

Total Film

Metal Hammer

FourFourTwo

Practical Caravan

Some of Future’s

big brands

April 2014

Zillah Byng-Thorne,

left, joins as chief

executive

June 2016

Acquires video games magazine

publisher Imagine for £16 million

August 2017

Buys Period Living and

Real Homes owner

for £33 million

August 2018

Expands into US consumer

tech with £100 million

takeover of Purch

November 2019

Unveils £140 million

acquisition of TI Media

January 2020

Hedge fund Shadowfall

unveils short raid

Nov 2020

Announces

Gocompare

acquisition

April 2020

TI Media deal gets green light

from regulator

October 2020

Acquires CinemaBlend

(for undisclosed sum)

Source: Refinitiv

or a step too far?

Future offer surprises market

Elementis gives short shrift to new bid

in industries ranging from cosmetics to

automotives. It employs about 1,600

people and reported revenues of

$874 million last year.

Its shares have been hit hard by a

drop-off in demand because of the pan-

demic, although they rallied after news

of vaccine breakthroughs, the first of

which came after Minerals Technolo-

gies had made its initial approach but

before it had disclosed it publicly.

Minerals Technologies, which re-

ported turnover of $1.8 billion last year,

said that it hoped to “engage with the

Elementis board with the goal of pro-

ceeding to a recommended transaction

that is highly attractive to Elementis’

shareholders. There can be no certainty

that any firm offer will be made. How-

ever, any firm offer would be likely to be

solely in cash.”

Analysts at Jefferies, the investment

bank, said that given Elementis’s share

price performance year, they “would

not be surprised if other parties had

been sharpening their pencils”. How-

ever they said that a successful takeover

offer should reflect a premium for

taking control, in addition to the “de-

pressed nature of the group’s earnings”.

Elementis’ shares rose by 3.4 per

cent, or 3¾p, to at 112½p.

Emily Gosden

$874 m

Elementis revenues last year

Elementis

Continued from page 39

was founded in 1985 and has grown

quickly under Ms Byng-Thorne, who

took charge of the company in 2014 and

embarked on an acquisition spree. The

group was valued at £1.6 billion last

night.

Goco, set up 24 years ago, previously

was part of Esure, the insurer that Sir

Peter founded. The price comparison

group is best known for its television

adverts, which feature Gio Compario, a

fictional opera singer. Harry Read, an

analyst at Liberum, the stockbroker,

said: “We did not see Future as a likely

acquirer of Goco, but on closer

inspection the asset holds many similar

characteristics to Future’s portfolio.”

Based on the two companies’ share

prices on Tuesday evening, Future’s

offer was pitched at a 23.6 per cent

premium to Goco’s closing level.