What has been announced regarding H.B. Fuller Company and Forbo Bonding Systems?
H.B. Fuller Company has signed an agreement to purchase the global industrial adhesives business of Forbo Group. The businesses to be purchased represent more than 80 percent of Forbo Bonding Systems. These businesses operate 17 manufacturing facilities in 10 countries, employ more than 1,100 people globally, and will generate approximately $580 million (CHF 510 million) in sales for the fiscal year ending December 31, 2011.
Why has H.B. Fuller signed an agreement to acquire Forbo's Industrial Adhesives business?
With this acquisition, H.B. Fuller is taking a further step forward in realizing our strategic plans to accelerate organic growth and improve EBITDA margins. Upon closing of the transaction, H.B. Fuller will be a $2 billion company (net revenue). Forbo’s industrial adhesives business will fortify our presence in Europe and enhance the transformation of our European business. It will increase our business in China by about 50 percent, and further strengthen our technology capability in our core markets, including packaging and durable assembly. In addition, we will gain proprietary technology and become one of a handful of manufacturers capable of producing VAE emulsions.
What are the terms of the deal? How much did H.B. Fuller pay?
The purchase price for the transaction is CHF 370 million on a debt-free and cash-free basis, or about $394 million at current exchange rates. The consideration will be paid in cash at the time of closing. H. B. Fuller has committed financing from Morgan Stanley Senior Funding, Inc., Citigroup Global Markets Inc. and JPMorgan Chase Bank, N.A., to support the completion of this transaction. Prior to closing the transaction, H.B. Fuller intends to raise permanent financing through private placement and syndicated bank loan markets.
Does H.B. Fuller expect any anti-trust concerns to surface before closing the transaction and if so where?
H.B. Fuller will be taking all steps to comply with any and all regulations to obtain approval for the transaction. Our customers will have the benefit of the combined product and process expertise of the two organizations being leveraged to address their problems and opportunities.
Why acquire Forbo's industrial adhesives business versus another adhesives company?
We are very excited about the proposed transaction. It is the only sizeable deal in the industrial adhesives space and will further our growth and margin improvement opportunities as we strive to be the best adhesives company in the world. Not only will this deal expand current net revenue by 30 percent, but it will strengthen our portfolio and supplement our progress towards our growth and profitability goals.
What is the purpose of the acquisition?
The Forbo industrial adhesives business will enhance H.B. Fuller’s business in a number of ways, including the following. It fortifies our presence in Europe, improving our base in southern Europe and in the U.K.; significantly increases the size of our business in China; complements and enhances our product offerings in core markets; brings proprietary technology in labeling and in polymers; expands our product line in textiles and reactive hot melts; and provides entry into new assembly markets.
How does this transaction fit with H.B. Fuller’s strategy? Does it change the strategy?
With the acquisition, H.B. Fuller takes a major step forward in realizing its strategic growth plans. Our target is to grow organically between 5 and 8 percent while improving EBITDA margins to 15 percent; Forbo industrial adhesives business will enhance H.B. Fuller’s ability to do both of these things. It will make the company stronger and more competitive. In other words, our strategy does not change – it gets accelerated.
Why does this transaction make sense for H.B. Fuller?
It will transform H.B. Fuller into a more formidable force in the adhesives industry. And it will enable us to offer additional opportunities and greater benefits for its customers, shareholders, communities and employees.
Will this acquisition bring H.B. Fuller into new markets? new geographies?
Yes, it will fortify our presence in Europe, improving our base in southern Europe and in the U.K.; significantly increase the size of our business in China; complement and enhance our product offerings in core markets, particularly durable assembly and packaging; bring proprietary technology in labeling and in polymers; expand our product line in textiles and reactive hot melts; and provide entry into new assembly markets.
How large is the synthetic polymer business and will you be divesting that business?
Forbo’s North American synthetic polymers business makes up about 10% of the acquired sales. This business fits in nicely with H.B. Fuller’s existing business, so the company has no plans to divest it. The company has specialized capabilities in this important business, and the polymers themselves are an important raw material for adhesives. Therefore, this business provides a source of vertical integration.
What remaining issues exist post signing of this agreement to purchase Forbo's industrial adhesives business?
In order to close the transaction and take ownership of the purchased business, H.B. Fuller must receive all necessary regulatory approvals and plan effectively to run the combined business on Day 1 post closing. At the same time, we must continue to operate as separate companies and as competitors where we compete today.
Who will lead the H.B. Fuller businesses after the acquisition?
Jim Owens will continue to lead H.B. Fuller as President and CEO. We have not yet fully designed the organization post acquisition.
What capabilities does Forbo's industrial adhesives business provide? What new technical capabilities will result from the acquisition?
Forbo’s industrial adhesives business will strengthen our capabilities in many of our core markets by making us larger and more global. In addition, we will acquire some new technical capabilities, such as VAE emulsion technology, an expanded reactive hot melt portfolio, and technology to participate more broadly in markets like assembly and textile.
What affect will this acquisition have on customers, suppliers and OEMs?
- Customers – H.B. Fuller will strengthen its leadership position in the adhesives industry. Our strategy is built on offering our customers innovative and differentiated products that offer them the lowest cost solution to their needs. We expect that, for most customers, we will be able to leverage our combined knowledge of products and applications to offer a higher level of service.
- Suppliers – H.B. Fuller will be even better positioned to partner with suppliers to innovate. Of course, we also expect to have more favorable terms with suppliers as our level of purchases will be higher.
- OEMs – H.B. Fuller will strengthen its leadership position in the adhesives industry. We will solidify our capabilities to innovate and service customers jointly with our OEM partners.
Will H.B. Fuller continue to make all of Forbo's industrial adhesives and synthetic polymers products available?
Customers should continue to operate business as usual with both companies until informed otherwise. H.B. Fuller will be studying in detail the product offerings of Forbo’s business to determine how we will service customers with equivalent or superior levels of products and services wherever possible. We will surely find some products across the portfolio that are appreciably the same and may choose to offer our customers the option to change, but that is not our key initiative at this point.
Who does the Forbo customer need to contact for customer service and support?
As soon as March 2012, when we are truly one company, we will be able to act as one company. Until then, we are two separate companies, and we are legally obligated to act as such. Customers should continue to utilize their existing contacts at both companies until informed to do otherwise.
When can I schedule a meeting to discuss my business with Forbo business with an H.B. Fuller representative?
H.B. Fuller and Forbo’s industrial adhesives business are separate companies until the closing of the transaction which is expected as soon as March of 2012. Until then, customers cannot jointly discuss business with both companies. After closing, H.B. Fuller will work quickly to design the customer-facing organization and reach out to customers for business discussions.
What will happen to customer pricing?
H.B. Fuller and Forbo are separate and competing companies until the closing of the transaction. Combined customer pricing will be studied and communicated after that time. We fully expect that the combined company will provide a high level of product, innovation, and service in exchange for a fair and competitive price.
What will the economic impact be for communities where H.B. Fuller and/or Forbo operate?
In the locations where we continue to operate, our employees and local suppliers will benefit from a stronger H.B. Fuller. We will be re-evaluating our overall footprint options as soon as we have full access to the Forbo industrial adhesives business in order to optimize our options in the future. We are not in a position today to provide specifics on impacts to individual locations. H.B. Fuller has an excellent reputation for being proactive in the communities in which we operate. We will continue our commitment to this approach and to working with our external stakeholders in locations where changes will occur.
Safe Harbor for Forward-Looking Statements:
Certain statements in this document may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, including but not limited to the following: the Company’s ability to effectively integrate and operate acquired businesses; political and economic conditions; product demand; competitive products and pricing; costs of and savings from restructuring initiatives; geographic and product mix; availability and price of raw materials; the Company’s relationships with its major customers and suppliers; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and environmental matters; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Further information about the various risks and uncertainties can be found in the Company’s SEC 10-Q filings of March 28, 2011, June 24, 2011, and September 23, 2011, and10-K filing for the fiscal year ended November 27, 2010. All forward-looking information represents management’s best judgment as of this date based on information currently available that in the future may prove to have been inaccurate. Additionally, the variety of products sold by the Company and the regions where the Company does business make it difficult to determine with certainty the increases or decreases in net revenue resulting from changes in the volume of products sold, currency impact, changes in product mix, and selling prices. However, management’s best estimates of these changes as well as changes in other factors have been included.
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