Cookson splits to allow Alent to thrive

Steve Corbett was so confident that Cookson’s demerger would be rubber stamped by shareholders that the chief executive of Alent, one of the two companies formed from the British engineering group’s split, had his new business cards printed well before last Monday’s vote.

The main reason for the split – much touted by the FTSE 250 group’s board and big investors – is to enable its performance materials unit and ceramics division to be more accurately valued as individual entities, and to allow the separate management to focus on their specialities.

“Cookson’s performance materials division has for a long time lived under the shadow of the much larger ceramics division,” says Mr Corbett, an American who will commute from Connecticut to head Woking-based Alent.

“Under the old Cookson Group, some of our cash would have gone into the ceramics division. Now we get to use our own cash exclusively for our own business.”

The split, which will be formalised on December 19, is far from even, with the bulk of Cookson’s assets remaining in its engineered ceramics division in a company named Vesuvius, to be headed by François Wanecq. In 2011, Cookson’s ceramics division reported sales of £1.8bn – more than four times the £418m of revenues reported by its performance materials unit.

Stakeholders will be granted one share in each of Alent and Vesuvius for every Cookson share they own.

The ceramics division, which manufactures the pipes and valves used to control the flow of molten metal in steel mills, has had a tough time of late, struggling with dwindling steel demand and squeezed margins.

“We expect group sales for Vesuvius to decline by 9 per cent year-on-year in 2012, followed by an 11 per cent decline in 2013,” say analysts at JPMorgan Cazenove. “The weak demand from both the steel and foundry industry towards the end of 2012 is likely to result in trading profit margins slipping.”

Last week, the division announced the closure of plants that make solar crucibles – containers for the melting of silicon – in Poland, Germany and China, axing more than 1,000 jobs.

“There could be more closures to come,” says Mr Wanecq, a French national. “I hope not, but we are ready to do so if the market requires it.”

“We expect to take advantage of the rebound when it comes, and it will come,” he adds.

Post-split, Vesuvius will also be hampered by its legacy precious metals business – a division that analysts have suggested may soon be put up for sale.

“If an appropriate offer for precious metals comes along, we will consider it, but there is no urgent need to take such measures,” Mr Wanecq says.

A further legacy heaped on Vesuvius will be Cookson’s pension fund, which reported a net deficit of £81m as of June 30.

Although the smaller of the two, Alent’s prospects appear rosier than those of Vesuvius, driven by the exponential demand for tablet devices, computers and smartphones. Alent supplies most of the big makers of tablets and smartphones, Apple’s iPhone 5, as well as much of the world’s solder used in circuit boards.

The name Alent is an amalgam of Alpha, its division that is the world’s largest supplier of soldering products by revenues, and Enthone, a surface chemistry that makes anticorrosive protective coatings for items such as car shock absorbers.

“More than 50 per cent of all smartphones contain some of our products, and for tablets the percentage is much higher than that,” says Mr Corbett.

Mr Corbett is positioning Alent to move into supplying parts for energy-efficient lightbulbs and wire ribbon to connect solar power cells.

“This market is about to explode. It is in its infancy now, but it is a market that we are expecting to boom,” he says.

The demerger will all but spell the end for the Cookson name – a 300-year-old brand whose roots stem from when Isaac Cookson started a glassworks business in Newcastle upon Tyne, later moving into manufacturing.

“The market likes clear-cut businesses where they can understand the drivers and the reasons for their evolution,” says Mr Wanecq.

“The board will only have one business to take care of, and that is a business that they are expert in.”

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