By Geoff Foster
PUBLISHED: 16:00 EST, 27 June 2012 | UPDATED: 16:00 EST, 27 June 2012
The odds on a takeover bid materialising for Yule Catto shortened considerably when shares of the chemicals maker crashed 38.9p, or 22 per cent, to a 52-week low of 138p on a shock profits warning.
Investors bailed out after the company said it expects business to be hit by the volatile euro and by weak demand for nitrile in Asia, a region where it was increasingly shifting its focus.
Nitrile is a speciality chemical used in the manufacturing of latex a very fine quality of rubber used in the making of rubber gloves. Yule Catto had said in March that it expected sales from emerging markets to offset low growth in developed markets but now the board reckons demand will remain weak until next year.
Speciality chemical companies have in recent years been swallowed like flies.
International bidders have swooped on those companies that make anything from additives for everyday products, such as paints, to materials used in the semiconductor industry. The diversity of their businesses makes the sector recession proof, as the need for their chemicals will always be there.
Yule Catto last year was the subject of intense speculation that either Dow Chemical or BASF of Germany was prepared to fork out 1.2bn or 350p a share in cash to swallow the Harlow-based company.
Any interested party would have to get the green light from Kuala Lumpur Kepong, which owns 19 per cent of Yule Cattos equity and has been a major shareholder since 1976.
Following overnight strength in Asian markets amid speculation that another rate cut by China is just around the corner, growing optimism that Europes leaders could yet deliver a positive surprise at today and tomorrows EU summit in Brussels helped the Footsie climb 76.96 points to 5,523.92 and the FTSE 250 86.6 points to 10,751.98.
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MARKET REPORT: Bad chemistry for Yule Catto
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