Bottom Line: JM and Cookson prepare a joint tonic

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The Independent Online
TO JUDGE from the smells wafting from the kitchen, something is cooking in the metals and materials sector between Johnson Matthey and Cookson.

But this is not to be a main course, more like an hors d'oeuvre. A full-scale merger in which Cookson's Richard Oster ceded his chef's hat to Johnson Matthey's David Davies - or vice versa - would produce an unappetising melange of chalk and cheese.

Yet neither company was rushing to deny yesterday that there might be some truth in recent rumours that they are talking to each other.

Read between the lines and the probability is that they are hatching some kind of joint venture.

Certainly the punters were out having a flutter on the idea yesterday, pushing JM's price up 4p to 483p and Cookson's up 6p to 202p.

After all, both companies know each other well. They operate in overlapping areas and share customers and research and development aims.

They also watch each other closely and have a track record of co-operation. Until it fell on tough times a couple of years ago Cookson even had a stake in JM.

There are a number of possibilities. Putting Cookson's tiddler of a precious metals business - which had a turnover of about pounds 105m last year - into JM's giant precious metals embrace - sales this year topped pounds 1.3bn - is one.

Then again, joining Cookson's ceramics business and JM's ceramics-related colour and print division, where the relative sizes are reversed, would also make sense. Perhaps both deals in an asset swap would make most sense of all.

Either way, it is to be hoped something is on the cards. Certainly it would provide a tonic for both groups. With Anglo's stake in JM in effect ruling out any bid and with metals prices unlikely to provide much excitement, Mr Davies is in search of a stimulus for his profits and share price.

Cookson, likewise, has emerged from a dark phase but needs something to give it a fillip. A deal that gave both companies critical mass in an area where they normally compete would probably do the trick.

The Cookson share price certainly requires something positive to justify a rating that gives little away to BTR.