H.B. Fuller to acquire Royal Adhesives & Sealants
The US$1.575 billion acquisition expected to create significant shareholder value while enhancing 2020 plan.
acquisition of adhesive company
aegre Baker Daniels LLP
American Securities LLC
H.B. Fuller Company
Morgan Stanley & Co. LLC
Royal Adhesives & Sealants
ST. PAUL, Minn.—H.B. Fuller Company has announced it has signed an agreement to purchase Royal Adhesives & Sealants, a leading manufacturer of high-value specialty adhesives and sealants.
This business consistently delivers industry-leading growth rates, EBITDA margins, and free cash flow that are expected to enhance H.B. Fuller’s position as a global leader in the adhesives industry.
“This accretive acquisition accelerates realization of our 2020 strategic objective to focus and grow in engineering adhesives and other highly specified market segments, while exceeding our targeted cash flow, EPS and EBITDA margin targets,” says H.B. Fuller president and chief executive officer Jim Owens. “With Royal’s strong customer relationships and experienced team, we will add depth and breadth to our portfolio. Royal’s complementary offerings will expand our presence in North America, Europe and China, and add new technology and capabilities. We have identified US$35 million in cost synergies and US$15 million in growth synergies that we expect to realize over the next three years as a result of merging these two great adhesives businesses. Upon closing the transaction, H.B. Fuller will be a company with nearly US$2.9 billion in revenue, focused on profitable growth in attractive engineering, durable assembly, and construction adhesives markets.”
Royal is expected to generate approximately US$650 million in revenue and US$138 million in adjusted EBITDA for H.B. Fuller’s fiscal year 2017. The company operates 19 manufacturing facilities in five countries, and employs approximately 1,500 people globally.
The agreed upon purchase price is US$1.575 billion, subject to customary adjustments. H.B. Fuller intends to finance the transaction through new debt financing.
H.B. Fuller has previously announced specific financial goals for organic growth, cash flow and EBITDA margin improvement in the company’s 2020 strategic plan and believes this acquisition will support acceleration and over performance relative to these objectives. Royal is a highly-respected supplier of industrial adhesives in a diverse set of end markets, including aerospace, transportation, commercial roofing, insulating glass, solar, packaging and flooring applications.
With this acquisition, H.B. Fuller will gain product technology and add people and skills that will result in a more capable and dynamic company for customers and employees. H.B. Fuller remains committed to maintaining its current dividend and rapid deleveraging using the significant free cash flow it expects to have available for this purpose.
Subject to customary closing conditions and regulatory approvals, the transaction is expected to close as soon as October of 2017. Morgan Stanley & Co. LLC is acting as H.B. Fuller’s sole financial advisor in relation to this acquisition, and Faegre Baker Daniels LLP is acting as H.B. Fuller’s legal counsel. H.B. Fuller is acquiring Royal from affiliates of American Securities LLC, based in New York with an office in Shanghai.
About H.B. Fuller Company
For 130 years, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. With fiscal 2016 net revenue of US$2.1 billion, H.B. Fuller’s commitment to innovation brings together people, products and processes that answer and solve some of the world’s biggest challenges. Its reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. For more information, visit www.hbfuller.com.
About Royal Adhesives & Sealants
Royal Adhesives & Sealants is a global developer and manufacturer of proprietary, high-performance adhesives and sealants. Headquartered in South Bend, Indiana, Royal offers a broad range of specialty formulated products designed to solve complex bonding, laminating and sealing applications across a diverse range of markets including aerospace and defense, construction, specialty packaging, automotive and industrial. The company offers a broad spectrum of customized thermosetting epoxy and urethane, solvent-based and water-based technologies to meet the most demanding adhesive and sealant applications. For additional information on Royal, visit www.royaladhesives.com.
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