Johnson Matthey may be a takeover target

Standard Industries, a US industrial conglomerate, disclosed on April 29 that it has purchased about 5% of the shares in the UK catalyst and specialty chemical firm Johnson Matthey (JM). JM’s share price subsequently jumped about 15% amid speculation that Standard may look to acquire the entire company. Neither Standard nor JM would comment.

At this stage, Standard could just be making a strategic investment, says Sebastian Bray, a chemical stock analyst at Berenberg Bank. “The just-over-5% stake revealed last week seems to be a potential expression of interest rather than a serious statement of intent at this stage,” he says.

But intriguingly, last year Standard acquired the US catalyst firm W. R. Grace for $7 billion. Analysts suggest that JM could be combined with Grace into one larger company focused on catalysts.

“The technology overlap of Johnson Matthey with Standard’s acquired W. R. Grace business seems quite substantial—there could be R&D as well as cost synergies,” Bray says.

Analysts at Jefferies Group voice a similar sentiment in a note to investors. “Standard Industries, in our view, would appear to be something like an ideal owner for the JM business,” they write.

Standard’s intentions may be unknown, but what is clear is that JM is in a state of flux. In recent months it has changed CEOs, ditched its plan to be a supplier of lithium-ion battery cathode materials, and agreed to sell its pharmaceutical fine chemical business.

And although JM’s hydrogen technology business is growing rapidly, its core business in automotive catalytic converters is declining.