H.B. Fuller rejects Ancora's $1.2 billion to $1.4 billion offer for construction unit
Key Facts
H.B. Fuller's board unanimously rejected a revised cash offer from Ancora to buy its Construction Adhesives Solutions segment for between $1.2 billion and $1.4 billion, according to the company's filing with the U.S. Securities and Exchange Commission. The proposal is Ancora's second unsolicited, non-binding offer to acquire the segment. The first offer, which the board also rejected, ranged from $1.1 billion to $1.2 billion, according to the company's earlier statement. The board said in the new filing that the revised proposal still lacked essential details. It described its terms as "highly conditional," adding an objection to the deal's conditions to its reservations about the segment's valuation.
The board based its rejection of the valuation on the Construction Adhesives Solutions segment's organic growth momentum, according to the company's filing. It also considered the segment's role within H.B. Fuller's platform and the gains the company expects from its "Quantum Leap" program. In its statement rejecting the first offer, the company said the segment delivered annual organic growth of 6% in the second quarter. It attributed that performance to strong pricing and volumes, citing contributions from both to business growth. The board cited the continuation of this momentum, alongside the segment's position within the group, among its reasons for maintaining a valuation above that reflected in Ancora's proposal.
The company's position also reflects the integration of the segment's industrial operations with its other businesses, according to the statement rejecting the first offer. The construction adhesives segment shares manufacturing with other H.B. Fuller businesses at more than thirty plants worldwide. The company believes separating the segment would create significant operating inefficiencies in these shared operations. Meanwhile, the "Quantum Leap" program includes rationalizing the manufacturing footprint, one of the sources of improvement the board cited in its valuation. H.B. Fuller expects the program to strengthen the segment's earnings capacity while expanding the reach of its core products, according to the same statement.
At the group level, adjusted earnings before interest, taxes, depreciation and amortization totaled $187 million in the fiscal third quarter, according to the earnings statement. That represents an annual increase of 9% in this measure of operating performance. The company attributed earnings growth primarily to pricing and restructuring savings, the two factors it identified in explaining the improvement in results. Its outlook for the current fiscal year puts adjusted earnings before interest, taxes, depreciation and amortization in a range starting at $655 million. The upper end of that range is $670 million, according to the guidance in the fiscal third-quarter earnings statement.
H.B. Fuller's net debt stood at $1,957 million at the end of the fiscal third quarter, roughly unchanged from a year earlier, according to the earnings statement. At the same time, the ratio of net debt to adjusted earnings before interest, taxes, depreciation and amortization fell to 3.0 times. The ratio was 3.3 times in the corresponding period a year earlier, according to the company. In its statement rejecting the first offer, the board expressed confidence in returning leverage to a range of 2.5 to 3.0 times. It set a timeframe of two years from the completion of the Advanced Medical Solutions acquisition, linking its debt target to the timing of that deal's closing.
Alongside rejecting the sale of its Construction Adhesives Solutions segment to Ancora, H.B. Fuller announced a process to review other businesses, according to its filing. The company will test market interest in selected businesses and product lines as part of this review. It described the targeted operations as less aligned with its portfolio and strategy, the criterion it announced for selecting them. It intends to use any proceeds from potential disposals to reduce leverage, linking the portfolio review to its debt reduction goal. The company expects to complete the review of market interest by the end of 2026, according to the target date in its filing.