Elementis plc

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Elementis plc

One Great Tower Street
London EC3R 5AH
United Kingdom
Telephone: (020) 7398-1400
Fax: (020) 7398-1401
Web site: http://www.elementis.com

Public Company
Incorporated: 1908 as Harrisons & Crosfield Ltd.
Employees: 2,971
Sales: £573.8 million ($928 million) (2000)
Stock Exchanges: London
Ticker Symbol: ELM
NAIC: 325131 Inorganic Dye and Pigment Manufacturing; 325188 All Other Basic Inorganic Chemical Manufacturing; 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing; 326291 Rubber Product Manufacturing for Mechanical Use; 326299 All Other Rubber Product Manufacturing; 422690 Other Chemical and Allied Products Wholesalers

Specialty chemicals producer Elementis plc holds worldleading positions in three areas: chromium chemicals, which are used in such areas as leather tanning, timber treatment, metal alloys and finishing, and ceramics; synthetic iron oxide pigments, the applications for which include pigmented concrete used in construction, decorative paints and other coatings, and cosmetics; and rheological additives, which are key ingredients in such products as paints, inks, hand lotions, and grease. Among the company’s other operations, Elementis owns Linatex, a leading brand of abrasion-resistant rubber. The firm adopted the Elementis name only in 1998, but the company history actually begins in 1844 with the formation of Harrisons & Crosfield (H&C), which eventually developed into a large conglomerate. The fortunes of H&C were closely linked to Britain’s position in the international marketplace, and its history was molded by a succession of strong personalities.

19th-century Origins in the Tea Trade

The partnership between Daniel Harrison, Smith Harrison, and Joseph Crosfield was formed in Liverpool on January 1, 1844. The Harrison brothers, the eldest and youngest sons in a family of 17 children, already were working as tea merchants in Liverpool. Joseph Crosfield was too young to have established himself in business, but at only 23 he was already recognized as an ambitious man and was reluctant to lose his independence by committing himself to a formal partnership.

Nevertheless, Joseph Crosfield’s parents persuaded their son to accept the favorable agreement offered by the Harrison brothers. In return for contributing one-quarter of the initial capital of £8,000, Joseph Crosfield was to receive three-tenths of the partnership’s profits. With Daniel Harrison as chairman, Smith Harrison as the firm’s representative at tea sales, and Joseph Crosfield in charge of the office, the partnership began its long history of trading.

For over 200 years the trade in tea had been controlled by the East India Company, which had obtained a monopoly when granted a royal charter in 1600. The Charter Act of 1813 canceled the East India Company’s monopoly and opened both India and China to wider enterprise. The removal of tariffs and shipping restrictions, increasing demand for tea in Britain, and the building of canals and roads in India further encouraged new trading ventures, but, because of the prohibitive expense of setting up plantations, the new firms that entered the market had to begin as agency houses rather than as primary producers.

In its first year of trading H&C made a modest profit of £3,000 on a turnover mostly derived from tea but with a small element of coffee trading. It expanded rapidly and in 1854 moved from Liverpool to Great Tower Street in London, where it was based until 1989. The partners’ benevolent attitude toward their staff was shown in their provision of free accommodation for unmarried employees and of free lunches for all workers. The firm now concentrated solely on the tea trade and benefited from its proximity to the tea markets of Mincing Lane. In just ten years the small provincial firm had become an established national organization with international aspirations.

During the middle of the 19th century, Britain’s trade with its colonies exceeded that of France, Germany, Italy, and the United States combined. The year 1869 marked a crucial point in the history of the tea trade. The opening of the Suez Canal made transportation quicker and cheaper while the building of all-steel ships made wooden-composite ships such as the Cutty Sark —launched in 1869—something of an anachronism. Furthermore, a plague of coffee leaf disease devastated the 1869 coffee crop, forcing planters to focus their attention on producing tea, an obvious substitute that could be grown successfully on the old coffee plantations. H&C benefited from all of these changes and in 1882 its annual sales of tea exceeded 100,000 crates for the first time.

Daniel Harrison’s son Joseph was admitted to the partnership in 1855, where he was to remain until his death in 1915. His father retired in 1863 to be replaced by Smith Harrison, who served as chairman of the firm for the next 20 years. By 1883, however, all of the original partners were dead, and despite the continued involvement of members from both families, the future of the firm was beginning to look less secure than during the first decades of rapid growth. Change came in 1894 when two salaried partners joined, representing the new management that was to initiate another period of expansion.

Turn of the 20th Century: Becoming Plantation Owners and Expanding into Rubber

Charles Heath Clark was an expert tea-blender who quickly grasped the commercial possibilities of expanding the range of products offered by the main office in London. H&C began to package tea for provincial merchants and it was a short step for the firm to produce its own brand for retail sale. The demand and supply of tea were both good and H&C benefited from a high margin on sales of Nectar, its proprietary brand. Heath Clark initially launched the brand in South Africa as he was unwilling to antagonize H&C’s customers in Britain by appearing to establish a competing brand. Indeed, when Nectar was launched in the United Kingdom in 1904, the cost of advertising the product was greater than any increase in income, and the loss of customer goodwill led H&C to sell the brand to Twinings.

The dynamic Arthur Lampard, a risk-taking entrepreneur, was to lead H&C into the 20th century. His strategy was to turn H&C into a firm with truly international interests, not only as tea agents but also as plantation owners. Lampard visited Russia in 1895 to set up a trade route from Ceylon to Moscow via Odessa in order to cut handling costs for H&C’s increasing number of Russian customers. In the same year Lampard visited Colombo, Ceylon, and set up Crosfield, Lampard & Co. to buy tea directly from plantation owners in Ceylon. Despite an unexpected fall in the market price of tea in 1904, Lampard continued his policy of overseas expansion, and by 1907 branch offices had been opened in New York, Montreal, and Kuala Lumpur.

H&C’s reliance on the tea market was soon to be reduced by its entry into the rubber market. In 1900 over two-thirds of the world’s annual supply of 40,000 tons of rubber was produced in Brazil, with the remainder coming from equatorial Africa. In 1903 Herbert Brett and W.S. Bennett, two names synonymous with the British rubber trade, enlisted Lampard’s help to issue a prospectus for the Pataling Rubber Estates Syndicate, a venture based on an old coffee plantation in Malaysia which had been converted to rubber growing.

H&C was appointed as agent and secretary to the company and Lampard persuaded his more cautious board members to make an investment of £1,000. Lampard was prepared to go without profit for the plantation’s first years, for he had forecast that a recent invention, the motor car, was likely to survive as rather more than a fashionable plaything for the rich, and that rubber for tires would eventually be in great demand.

In 1905 Lampard and Brett, the latter by now an employee of H&C, purchased several small estates in Malaysia for £50,000 and amalgamated them into the Golden Hope Rubber Estate. Whereas the Pataling Syndicate had been undersubscribed, shares in Golden Hope were sold at a substantial premium. The following year Lampard visited the east coast of Sumatra and set up a plantation with a Swiss planter, Victor Ris, who shared Lampard’s vision of large plantations organized in the same efficient manner as Sumatra’s huge tobacco plantations.

These ventures in Malaysia and Sumatra carried more risk than those in Ceylon, which was perceived as a maturing economy run by professional and experienced planters. By supporting Malaysian and Sumatran plantation owners—for example, by underwriting new crops, providing fertilizers and harvesting equipment, and acting as sales agents—H&C ensured the success of the plantation and, as an obvious consequence, its investment. The company took responsibility for bookkeeping and the raising of finance and sent powerful visiting agents to inspect the plantations. In this way the fledgling plantations benefited from high-quality advice on both the financial and agricultural aspects of the business.

Company Perspectives:

Elementis is an international specialty chemicals group. The businesses of the Group address their markets through a combination of product leadership, technical expertise and customer understanding.

Elementis is committed to creating value for shareholders through organic growth and selective acquisitions that have the capacity to earn returns above the cost of capital, while preserving the integrity of its commitment to the health and safety of employees, their communities and the environment.

Lampard had forecast astutely that his plantation rubber would be of a superior quality to that harvested in wild conditions in Brazil and Africa and his move into rubber growing was followed swiftly by Michelin, Dunlop, and Firestone. Britain’s previously unenthusiastic financial sector, which had curtailed investment overseas because of the Boer War of 1899 to 1902, was now impressed by the prominent Lampard who worked ceaselessly to establish the industry worldwide. When the price of rubber rose from around four shillings per pound in 1902 to 12 shillings in 1905, Lampard’s willingness to take risks was justified totally.

The next important step taken by the partners of H&C was to turn the firm into a limited-liability company. For several years it had been felt that a partnership, with its reliance on capital that could be withdrawn on the death or retirement of a partner, was too restrictive for an organization with ambitious expansion plans. Obtaining limited liability would make extensive capital expenditure possible—and most importantly for a business that was still run largely by the scions of two families—the shareholders of the company could vote against nepotistic elections to positions of responsibility.

A prospectus was issued by the brokers Foster and Braithwaite in May 1908 and the issue was fully subscribed. Existing partners exchanged their partnership capital for £150,000 of ordinary share capital and the first new directors took up 150,000 management shares of one shilling each. Friends, employees, and customers took up large blocks of shares and only £50,000 out of a total issued share capital of £307,500 was bought by private and institutional investors who had no direct link with the company. Years of steady profits and a stated aim of building up reserves rather than recklessly distributing profits ensured the success of the issue.

The worldwide increase in rubber planting was bound to lead to oversupply when crops were harvested four or five years after the first seeds were sown. The price dropped to between three or four shillings per pound in 1906, and reached a low of less than three shillings following the U.S. bank crisis of 1907. H&C weathered several difficult years until 1910, when the internal combustion engine became available, making the massproduction of cars economically viable. The demand for tires led to an annual demand for rubber of 100,000 tons in 1911, and H&C made excellent profits as rubber soared to 12 shillings per pound. The rubber boom forced H&C into building new accommodations to deal with increased paperwork flowing through the London office.

1910s Through 1930s: Rocky Times and Further Diversification

Charles Heath Clark became chairman of H&C in 1911, replacing James Crosfield, who had served the company for 46 years. He took over during a period of rapidly falling rubber prices and slow growth in tea sales. The seaman’s strike of 1911 led to riots at Liverpool Docks and a one-month embargo on unloading ships. The London Dock Dispute of the following year further damaged H&C when 100,000 men were called out over a very minor dispute. Nevertheless, an issue in 1912 of £150,000 worth of £1 ordinary shares at a premium of ten shillings was oversubscribed.

The outbreak of World War I hit H&C badly. Britain diverted its resources to the manufacture of heavy engineering goods to support the war effort and communication with the plantations became increasingly difficult. Shipping restrictions and a low level of demand for tea caused a decline in international trade and many of the staff were called up to serve in the army. To compound the company’s misfortune Arthur Lampard died in 1916, and no adequate successor could be found to take over the leadership of the plantation companies until the war was over.

Henry Welch was an important addition to the board in 1917. A solicitor who had built up an extensive practice in the City of London, Welch had experience as a director of several public companies and was responsible for the founding of the National Institute of Industrial Psychology in 1921. His main task was the reorganization of the company’s balance sheet as soon as the war was over, when he restructured the share capital of the company to reflect the massive changes that H&C had experienced in the ten years since its incorporation.

Key Dates:

1844:: Daniel Harrison, Smith Harrison, and Joseph Crosfield form a partnership in Liverpool to trade tea and coffee.
1854:: The firm’s headquarters are moved to London.
1894:: New managers—Charles Heath Clark and Arthur Lampard—join firm and initiate expansion into plantation ownership.
1903:: Business enters the rubber market.
1908:: Partnership is turned into a limited-liability company under the name Harrisons & Crosfield Ltd.
1920:: Company expands into timber through the purchase of the China Borneo Company.
1923:: Company begins production of Linatex, an abrasion-resistant form of rubber.
1935:: The Harcros chain of builders’ merchants is launched.
1947:: Chemical manufacturing begins through joint venture with Durham Chemicals.
1973:: British Chrome & Chemicals is acquired.
1979:: American Chrome & Chemicals is acquired.
1982:: Three large plantation groups are sold to Malaysian concerns; company goes public as Harrisons & Crosfield plc.
1985:: Pauls plc, maker of malt and animal feed, is acquired.
1988:: The firm’s chemical interests are amalgamated as Harcros Chemical Group.
1989:: Edward Baker, a specialist pet-food company, is purchased.
1990:: Most of the company’s general trading unit is divested; Crossley chain of builders’ merchants is acquired.
1994:: The Indonesian plantations are divested.
1996:: Company makes final exit from the plantation business.
1997:: The Harcros builders’ merchant business is sold, beginning the divestment of all nonchemical units.
1998:: Company changes its name to Elementis plc; Rheox, maker of rheological additives, is bought from NL Industries; remaining nonchemical units are divested.
2001:: Company effectively puts itself up for sale.

Despite the war the directors of H&C did not ignore the possibility of new ventures abroad. Chinese green-leaf tea remained popular in Russia, the United States, and north Africa and H&C set up a joint venture with an established Chinese company to form Harrisons, King and Irwin in 1917. Based in Shanghai, with branch offices in Hankow and Foochow, the office was to be one of the casualties of the Japanese invasion during World War II.

Heath Clark, exhausted by his efforts in leading H&C through the war years, resigned from his position as chairman at the end of 1918. George Croll, who had worked for H&C in the Far East, was elected as his successor, but the young man whose energy had made a great impact on the company’s plantations was to be dogged continually by ill health. Two successful issues of £150,000 in ordinary shares were made in January and July 1919, and the board was strengthened to include a complement of nine full-time members.

An issue of £400,000 ordinary shares made in December of the same year, however, was undersubscribed, and for the first time in the company’s history a substantial portion of the issue had to be taken up by the underwriters. It was a time of national and international economic gloom and prices for tea and—in particular—rubber plummeted. Plantations were operating at a loss; and Heath Clark became a prime mover in the Rubber Growers’ Association, which voluntarily agreed to cut production in India, Ceylon, and the Dutch East Indies. Immediate profits were sacrificed, but future production in a more stable market was guaranteed by withdrawing 25 percent of possible output in 1921. Heath Clark formally reassumed his old position of chairman on the death of George Croll in 1922.

A significant new venture was begun in 1920 when H&C and the Chartered Company of British New Guinea acquired the assets and goodwill of the China Borneo Company. H&C was given exclusive rights to cut and develop timber and received Borneo government backing to develop the timber industry in Borneo. Production rose from 1.1 million cubic feet in 1919 to six million cubic feet in 1940. The timber-supplies division of H&C grew to include ventures in Australia and the United States and gained a particularly strong brand image in its Harcros chain of builders’ merchants which was started in 1935.

In 1921 H&C’s relatively minor interests in tobacco plantations were sold to Dutch companies. H&C felt that it lacked the experience necessary to turn the growing of tobacco, always a delicate crop to harvest, into a regular source of profits. Profits from tea enjoyed a renaissance in the late 1920s but the boom contained the seeds of its own destruction as increased plantings were to lead to an excess of supply in the early 1930s. Expenditure on research and development gave a boost to the company, however, when Linatex was invented by Bernard Wilkinson, an assistant on a Malaysian rubber plantation. The Linatex process, which treated rubber to allow its use as an abrasion-resistant lining, had the twin advantages over mild steel of increased strength and lower cost and continued to be a valuable source of income for the firm.

H&C also diversified into growing coconut palms in the Philippines, Ceylon, and on the Malabar Coast. Once the kernel of the coconut is dried it turns into copra, which is then crushed to produce coconut oil. H&C initially sold this as a raw material for the production of soap and candles but the postwar shortage of butter led to demand for substitute products. Margarine, which is composed largely of coconut oil, became increasingly popular, and production of copra reached one million tons annually during the 1930s. The depression suffered by the company’s rubber interests was partially offset by this boom.

Eric Miller, a director of H&C since 1911, had been largely responsible for the Stevenson Report, which attempted to control the build-up of rubber stocks after the end of World War I. Miller had many close links with the heads of banks and rubbergrowing companies and was a born diplomat. He convinced Winston Churchill that sales of British rubber at a good price to the United States would do much to pay off Britain’s war debt to that country. As with previous similar agreements, the plan was to restrict production in India, Ceylon, and the Dutch East Indies as a method of stabilizing world prices.

The Wall Street crash of 1929 precipitated the Depression. This was to be a severe test for Eric Miller, who was now chairman of H&C. The company’s profits for 1932 fell to £183,000, less than half the amount recorded in 1929. The world withdrew from international trade, putting up tariffs and imposing quotas on imports. Exchange rates fluctuated wildly and companies were reluctant to grant any form of credit as insolvencies became commonplace. H&C was forced again into a voluntary reduction of one of its commodities as the Tea Regulation Scheme limited exports from India, Ceylon, and the Dutch East Indies. Despite these measures, the company was forced to close several of its plantations.

The situation for rubber was even worse. The International Rubber Regulation Committee, to which Eric Miller was appointed by the government of British Malaya, signed an agreement in May 1934 that allocated each rubber trading company a strict production quota. With only a very few exceptions, new plantings of rubber were prohibited.

The outbreak of World War II was a further immense blow to the company as shipping lines closed and trade slumped. The entry of the Japanese into the war in October 1941 led to the invasion and subsequent loss of many of the Far Eastern plantations.

Postwar Era: Commodity Travails, Rising Interest in Chemicals

The end of the war saw more years of difficult trading for H&C. Demand for commodities was dampened by economic recession in the United Kingdom and transportation was difficult because of disruption to shipping lines. As in World War I, H&C lost many employees to the armed forces, and the Nazi bombardment of the City and the docks of east London further hampered international traders. Many plantations in the East had been destroyed by the invading Japanese, and when H&C attempted to reestablish operations abroad it was dismayed to see the effects of years of neglect.

The early 1950s saw a deterioration in the relationship between countries in the Far East and those countries that had controlled the majority of their trade. It was a time when war-damaged Britain was losing its old empire and the former colonies were no longer content to accept their traditional role of primary producer to foreign profit-takers. Governments imposed stringent restrictions on the transference of profits from their country to foreign agents and began to seek control over commodity prices. When H&C sought to renew its plantation leases in Indonesia it was forced to surrender one-third of its land to the Indonesian government. The outbreak of civil war in 1958 and increasing unrest in Malaysia and Sumatra left H&C unable to meet the commodity requirements of many of its customers.

H&C reacted to these problems by becoming increasingly involved in new technologies. A process to manufacture cyclized rubber was developed at the Rubber Research Institute of Malaysia and in the mid-1950s H&C began large-scale production. This rubber, which is used in printing inks and paints, was distributed by Durham Raw Materials Ltd., a joint-venture company half owned by H&C. The development of crumb rubber, and the introduction of standard grades for Malaysian rubber from 1965 onwards, did much to stabilize the rubber industry and, as a consequence, to make H&C’s profits from this sector more consistent.

H&C also decided to take over the full ownership of the British Borneo Timber Company as part of a strategy to increase the importance of this sector. Throughout the 1970s the company, through its Harcros subsidiary, began to buy up small timber yards throughout the United Kingdom. The acquisition of larger timber merchants, such as the Sabah Timber Company, gave H&C a powerful distribution network from which to pursue further expansion. It was a logical step to use these existing sites to establish a chain of builders’ merchants, still under the Harcros name, that supplied a full range of materials to the construction industry.

Eric Miller was knighted in 1958 after being replaced as chairman by Sir Leonard Paton in 1957. Although Paton served as chairman for only five years, he can be considered responsible for beginning the transformation of H&C, arguing long and hard to guarantee an adequate supply of timber from the Borneo plantations. Paton was replaced in 1962 by Finlay Gilchrist, who devised a complex system of defensive crossholdings between the H&C holding company, its subsidiaries, and its associates. By deliberately forging an intricate structure, Gilchrist was able to protect all of the group’s interests from predators looking to take over a small, but nonetheless valuable, subsidiary.

Tom Prentice became chairman in 1973 during a turbulent time for the company and needed to rely on all of the skills he had learned in the timber industry in the East. The nationalization of plantations in Sri Lanka—formerly Ceylon—was soon followed by changes in Malaysia which required foreign companies to relinquish 70 percent of their interests by 1990. The group, supported by Baring Brothers merchant bank, undertook a further complicated restructuring designed to unite the group’s interests in order to protect the value of shareholders’ investments. Throughout the 1970s this complicated structure withstood the efforts of corporate raiders—most noticeably the Rothschild Investment Trust—and Prentice was able to lead H&C away from its dependence on plantations to encompass fully the opportunities offered by chemicals, building supplies, and agriculture.

Transformation via Series of Purchases and Disposals: 1980s Through Mid-1990s

The 1980s showed the effects of this diversification away from a reliance on commodities that proved too cyclical to guarantee consistent profits. In 1982 three large plantation groups—Golden Hope, Pataling, and London Asiatic—were sold to Malaysian concerns for £146 million. In 1984 H&C sold a large portion of its Malaysian investments to Permodalan, the state-controlled investment company. The remaining 30 percent was sold in 1989 for £145 million, but the plantations in Sumatra still remained in H&C’s ownership. H&C was floated on the London Stock Exchange in 1982—as Harrisons & Crosfield plc—and began reshaping its activities with a series of purchases and disposals.

In 1985 H&C made a significant acquisition with the purchase of Pauls plc, a manufacturer of malt and animal feeds, for £116 million. Profits from this company formed the backbone of H&C’s food and agriculture division, which was strengthened by the acquisition of Edward Baker, a specialist pet-food company, in 1989. George Paul, the chief executive officer of Pauls, was elected to the board of H&C and, along with Thomas Prentice, became joint chief executive officer of the company.

By 1986 H&C intensified its aim of moving away from troplcal soft commodities. Palm oil prices had dropped by nearly 50 percent during the year, and profits from the rubber market were depressed by expenditure on research into disease control. George Paul identified the company’s problems as overdiversification, a reliance on primary agricultural products, and weak management in certain sectors. Paul instigated a rationalization plan and hinted that noncore companies would be sold off even if they were of historical importance to the company. As an example, Durham Chemicals Distributors Ltd. was sold in 1987, leaving H&C to concentrate on chemical manufacture rather than distribution.

Paul also took steps to improve H&C’s image in the City. Perceived as a steady but rather dull holding company, the board took on the former head of M and G Fund Management, David Hopkinson, to convince the City of the group’s intrinsic worth. After frequent allegations of insider dealing, fund managers began to see well-established conglomerates such as H&C as perfect vehicles for regular, long-term growth. Dependence on the plantations was reduced rapidly and by 1986 they accounted for less than one-quarter of the group’s profits. The City, which had always preferred to deal directly with the commodity market rather than through holding companies with interests in commodities, was becoming increasingly enamored with H&C.

In November 1988 H&C announced the reorganization of its chemical interests under the new name of the Harcros Chemical Group. Its component parts included British Chrome & Chemicals (acquired in 1973) and American Chrome & Chemicals (acquired in 1979), world leaders in manufacturing chromium chemicals, and Troyfel Ltd. and Hardman Inc., which specialized in iron oxide technology and adhesives. At the time of the reorganization George Paul stated that the company’s intention was to double the size of this group, through organic growth and selective acquisitions, within five years.

The deal making continued in the 1990s, further altering the composition of H&C. In 1990 the company sold off the bulk of its general trading unit in a further deemphasis of the founding business. The Crossley chain of builders’ merchants was bought from Bowater Industries for £113 million in May 1990 and then amalgamated into Harcros, the flagship of the group’s timber and building supplies division. That same year, H&C bolstered the pigments side of its chemicals unit through the purchase of Pfizer Pigments from the U.S. drug firm Pfizer Inc. for about £40 million ($65 million). This deal moved H&C into the number two position worldwide in the production of synthetic iron oxide pigments, used in construction, coatings, and cosmetics. Profits suffered in the early 1990s from the effects of recession and the resulting slump in the building industry, a slump that affected both the building supplies and chemical operations of H&C.

In 1992 H&C beefed up its animal feeds unit, known as Pauls Agriculture, with the £67 million purchase of several agricultural units of Unilever, including BOCM-Silcock, a maker of animal feed through its 22 U.K. feed mills; Unitrition, an oil miller; and Fulmar, a maker of fish feed based in Scotland. By 1994, Bill Turcan had taken over as chief executive. The new leader effectively ended a chapter in the long history of Harrisons & Crosfield that year by selling off the firm’s Indonesian plantations to a group of four Indonesian businessmen for £176 million ($273 million) in cash. Also in 1994 came the divestment of two consumer food units that specialized in private-label cereals. H&C, by and large, now consisted of the building supplies, chemicals, and animal feeds operation, although it would be 1996 before the company’s final plantation interest, one located in Papua New Guinea, was sold off.

Late 1990s and Beyond: Emerging As Elementis

The company’s conglomerate holdings continued to result in poor profits and a weak share price, leading to a decision in 1997 to focus full attention on specialty chemicals, the sector in which management felt that, based on growth prospects, H&C could best enhance shareholder value. Late that year, the Harcros builders’ merchant business was sold to Meyer International for £318 million. Over the next year, the remaining nonchemical units—in timber, food, agriculture, and pet food—were sold off, and at the start of 1998 H&C changed its name to Elementis plc.

Part of the proceeds from the divestments were returned to shareholders in the form of a special distribution totaling £402 million ($643 million). Much of the remainder was used for the purchase of Rheox from NL Industries Inc., a £280 million ($450 million) deal completed in early 1998. Rheox was a maker of rheological additives used to control the flow characteristics of such products as paints and cosmetics. Elementis thus ended its first full year of operation with several main units: chromium chemicals, where it was the world leader; pigments; specialties, which included Rheox and other businesses, such as performance polymers and zinc products; Linatex, maker of abrasion-resistant rubber; and Harcros Chemicals, a U.S. chemical distributor. Late in 1998 Turcan, having shepherded H&C through its transformation into Elementis but not having a chemicals background, was replaced as chief executive by Lyndon Cole, who had been an executive at GE Plastics, a division of the U.S. giant General Electric Company. Sales from continuing operations for 1998 totaled £534.2 million ($850 million).

Market difficulties led to a restructuring in 1999 that eliminated more than 300 jobs from the workforce and aimed for annual cost savings of more than £10 million. Competitive pressures, particularly in the company’s core area of chromium chemicals, contributed to the sinking of the company’s share price to an all-time low early in 2000. Rumors of a takeover of Elementis began to circulate and continued throughout 2000. In December of that year, the company’s shares rose sharply after an approach was made by a private equity capital firm regarding a possible takeover. Meantime, restructuring efforts had resulted in better financial results for 2000, including a 12 percent increase in operating profit and a 14 percent gain in profits before taxes. Sales increased 7 percent to £573.8 million ($928 million). The future of the company remained in doubt in early 2001, however, as the firm essentially put itself up for sale in March of that year, seeking acquisition offers that might be “in the best interests of shareholders.”

Principal Subsidiaries

Elementis UK Limited; Linatex Limited; Elementis Chromium LP (U.S.A.); Elementis Pigments Inc. (U.S.A.); Elementis Specialties Inc. (U.S.A.); Harcros Chemicals Inc. (U.S.A.); Linatex Corporation of America Inc. (U.S.A.).

Principal Divisions

Elementis Chromium; Elementis Pigments; Elementis Specialties; Harcros Chemicals; Linatex.

Principal Competitors

Imperial Chemical Industries PLC; Clariant Ltd.; Laporte plc; Akzo Nobel N.V.; E.ON AG; BASF Aktiegesellschaft; Bayer AG; OM Group, Inc.; Air Products and Chemicals, Inc.; E.I. du Pont de Nemours and Company; The Dow Chemical Company; Rohm and Haas Company.