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H.B. Fuller (FUL) to Divest Non-Adhesive Business to Tiarco

Zacks Equity Research

H.B. Fuller Company FUL announced that it will divest its surfactant, thickener and dispersant business to a subsidiary of Textile Rubber and Chemical Company, Inc. — Tiarco, LLC. Tiarco offered to purchase the aforementioned business for $71 million.

It is worth mentioning here that H.B. Fuller’s shares increased 0.51% yesterday, closing the trading session at $43.36.

Tiarco is primarily engaged in developing latex additives, grease & lubricant additives, reservol, and water treatment additives for use in custom/toll manufacturing, grease & lubricant, and other markets. It is based in Dalton, GA.

Brief Discussion on Divestment Deal

Of H.B. Fuller’s to-be-divested business, surfactants are mainly used in wetting agents, foam boosters (applied in healthcare and beauty products) and detergents. Thickeners are applied in floor coatings, carpet, caulk formulations and adhesive.

The to-be-divested business generated revenues of $25 million in fiscal 2018 (ended Dec 1, 2018), and earnings before interest, tax, depreciation and amortization of roughly $8 million. This business became part of H.B. Fuller with the latter’s acquisition of Royal Adhesives and Sealants in October 2017.

This divestment transaction will enable H.B. Fuller to concentrate on its core (adhesive solutions) businesses as well as using net proceeds to pay down debts. Closure of the transaction is expected in the third quarter of 2019.

Inorganic Activities of H.B. Fuller

For strengthening its business growth opportunities, the company not only favor divestment of non-core businesses but also believes in making acquisitions.

Since acquired in 2017, the buyouts of Adecol Industria Quimica, Limitada; Royal Adhesives and Sealants; and H.E. Wisdom & Sons, Inc. and its affiliate Wisdom Adhesives Southeast, L.L.C. have been strengthening H.B. Fuller’s businesses.

Zacks Rank & Stocks to Consider

With a market capitalization of nearly $2.2 billion, H.B. Fuller currently carries a Zacks Rank #3 (Hold).

In the past 60 days, the Zacks Consensus Estimate for the company’s earnings remained unchanged at $3.29 for fiscal 2019 (ending November 2019) and $3.98 for fiscal 2020 (ending November 2020).

H. B. Fuller Company Price and Consensus


H. B. Fuller Company Price and Consensus

H. B. Fuller Company price-consensus-chart | H. B. Fuller Company Quote

In the past three months, H.B. Fuller’s shares have declined 13.5% against 5% growth recorded by the industry.

Some better-ranked stocks in the industry are Axalta Coating Systems Ltd. AXTA, Israel Chemicals Ltd. ICL and Sensient Technologies Corporation SXT. While Axalta Coating currently sports a Zacks Rank #1 (Strong Buy), Israel Chemicals and Sensient Technologies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

For the current year, earnings estimates for these companies have improved over the past 60 days. Further, positive earnings surprise for the last four quarters was 19.62% for Axalta Coating, 13.68% for Israel Chemicals and 0.33% for Sensient Technologies.

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