H.B. Fuller Rejects Ancora’s $1.1 Billion to $1.2 Billion Bid for Adhesives Unit

H.B. Fuller has rejected Ancora Holdings Group’s unsolicited cash proposal to buy its Building Adhesives Solutions business for $1.1 billion to $1.2 billion, setting up a sharper dispute over whether the adhesives maker should keep the unit or use a sale to reduce debt and reshape its portfolio.

The board voted unanimously against the non-binding offer after reviewing it with independent financial and legal advisers. H.B. Fuller said the proposed price materially undervalues Building Adhesives Solutions, or BAS, does not reflect the segment’s growth prospects and lacks enough information about Ancora’s ability to finance and operate the business independently.

Ancora responded the same day by reaffirming its proposal. The activist investor said the purchase would not depend on a financing contingency and that it could increase the price if due diligence showed additional value in BAS, leaving the two sides divided not only on valuation but also on how much weight to give the unit’s strategic ties to the rest of H.B. Fuller.

H.B. Fuller says BAS is worth more inside the company

Ancora made the offer public on Aug. 12, proposing an all-cash purchase in the $1.1 billion to $1.2 billion range. H.B. Fuller confirmed receipt of the proposal that day and said the written letter was Ancora’s first formal offer for BAS, although the investor had previously expressed what the company described as a passing verbal interest in the business.

In rejecting the proposal, H.B. Fuller argued that the valuation was below what comparable businesses have fetched in past deals. The board did not publish its own valuation for BAS, so the disagreement remains a contest between Ancora’s stated price range and management’s view that the business has more earnings power than the proposal recognizes.

Recent operating figures are central to the company’s case. BAS generated $245.2 million of second-quarter revenue, up from $224.2 million a year earlier, and H.B. Fuller said organic revenue in the segment grew 6%. The board also cited a 10% year-over-year improvement in BAS EBITDA, supported by pricing and volumes, as evidence that the unit is gaining momentum even before a broader recovery in construction markets.

Management is also tying its defense of BAS to Project Quantum Leap, H.B. Fuller’s restructuring and footprint-rationalization program. The company said those actions should improve the segment’s earnings capacity, while construction activity and data-center development could provide additional demand in end markets served by BAS products.

The board’s argument extends beyond revenue and margins. H.B. Fuller said BAS shares manufacturing operations with its other businesses at more than 30 plants worldwide, meaning a separation could create operating inefficiencies and added tax or separation costs. In the company’s view, those effects would offset part of the balance-sheet benefit from selling the unit and paying down debt.

Ancora says a sale would speed deleveraging

Ancora takes the opposite view of the portfolio question. In its Aug. 12 letter, the investor said an all-cash sale could accelerate H.B. Fuller’s deleveraging plans, reduce management complexity and allow the company to concentrate more heavily on its pending acquisition of Advanced Medical Solutions Group, or AMS, and the continuing Quantum Leap program.

The proposal was based on publicly available information and remained subject to due diligence, required approvals and negotiation of a definitive agreement. Ancora said it was highly confident it could secure the necessary financing and specifically stated that a completed purchase would not be conditional on obtaining financing. It also said it was prepared to revise the price upward if additional information supported a higher valuation.

H.B. Fuller’s board was not persuaded by those assurances. Its response said Ancora had not supplied sufficient detail to show how it would finance the acquisition or run BAS without continuing support from H.B. Fuller. Ancora later criticized the board for rejecting the offer without engaging in due diligence discussions and said it remained willing to pursue the purchase.

The financing debate matters because H.B. Fuller is already carrying substantial leverage. At the end of its second quarter, the company reported net debt of about $1.96 billion and a net-debt-to-adjusted-EBITDA ratio of 3.1 times. H.B. Fuller has said it expects to bring leverage back into its 2.5 to 3.0 times target range within two years after completing the AMS acquisition, relying on cash generation and operating improvements rather than selling BAS.

That planned acquisition adds another layer to the dispute. H.B. Fuller agreed in June to acquire AMS, a U.K.-based medical technology company, at an enterprise value of £715 million. The company expects the combination to add about $300 million of annual revenue and roughly $55 million of run-rate revenue and cost synergies by 2031, while pushing the portfolio toward higher-growth medical markets.

Activist pressure now extends beyond Ancora

Ancora is not the only shareholder pressing H.B. Fuller to test alternatives. Engine Capital, which says it owns about 2% of the company, called on the board on Aug. 14 to run parallel market checks for both BAS and H.B. Fuller as a whole. Engine did not endorse Ancora’s price as necessarily sufficient, but argued that a competitive process would give the board better evidence about what the unit and the entire company could command from buyers.

That position complicates H.B. Fuller’s decision. A sale of BAS could generate cash for debt reduction and reduce exposure to a lower-margin construction-oriented segment, but it would also remove a business that accounted for about one quarter of company revenue in the second quarter and that management expects to improve as restructuring savings and construction demand build.

The board has said it remains open to opportunities that enhance shareholder value and will continue reviewing both individual businesses and the company as a whole. For now, though, its stated priority is to close and integrate AMS, continue Quantum Leap and pursue commercial and manufacturing improvements without carving out BAS.

Ancora’s reaffirmed proposal means the issue is unlikely to disappear simply because the first offer was rejected. There is no signed agreement, sale process or board-authorized negotiation with Ancora at this stage, and the $1.1 billion to $1.2 billion range remains an expression of interest rather than a binding purchase price. H.B. Fuller expects the AMS acquisition to close by the end of the calendar year, subject to its remaining conditions, making that integration and the company’s leverage path the next concrete tests of the board’s preferred strategy.