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H.B. Fuller Finalizes Its Adecol Deal

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H.B. Fuller update on Adecol

On November 6, 2017, H.B. Fuller (FUL) provided its acquisition plans for Adecol Indústria Química, a Brazilian company. H.B. Fuller has now finalized the acquisition deal with the adhesive manufacturer.

Adecol caters to the packaging, converting, and assembling markets and would likely enhance FUL’s footprint in Brazil, providing a broader product range that could drive the future revenue growth. Adecol reported $40 million in revenues in 2016.

No financial details were available for the acquisition. However, it had been previously announced that H.B. Fuller would be paying eight times Adecol’s 2016 EBITDA (earnings before interest, tax, depreciation, and amortization). In September, H.B. Fuller announced the acquisition of Royal adhesives for nearly $1.6 billion.

H.B. Fuller CEO (chief executive officer) Jim Owens stated: “With this acquisition, we gain a dedicated team with strong customer relationships and local manufacturing capabilities. We will work closely with the Adecol team to further enhance partnerships with regional customers and to develop, produce and sell new and better products in this strategically important geography.”

Stock performance

H.B. Fuller stock fell 3.7% in the week ended November 10, 2017, underperforming the PowerShares DWA Basic Materials Momentum Portfolio (PYZ), which fell 1.2% during the same period. The fall in FUL’s stock price has caused the stock to trade exactly at its 100-day moving average price of $53.66, but FUL’s 14-day relative strength index score of 25 indicates that the stock has moved into oversold territory temporarily—and so there could be more buying activity, which could push its price up.

The analysts’ consensus on FUL indicates a target price of $60.75 over the next 12 months. On a YTD (year-to-date) basis, the stock has returned 11.1%.

Notably, investors can indirectly invest in FUL through PYZ, which has 1.5% of its holdings in H.B. Fuller. The fund also provides exposure to Chemours (CC), FMC (FMC), and LyondellBasell (LYB), which had weights of 5.3%, 5.1%, and 5.1%, respectively, as of November 10.

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