H.B. Fuller Sinks 8% as Ancora Blasts Medical-Adhesives Deal

Shares of H.B. Fuller (FUL) dropped about 8 percent in late-morning trading Thursday after the specialty chemicals maker announced a recommended cash offer for Advanced Medical Solutions Group plc. The move drew sharp criticism from activist investor Ancora, which said the price was too high and the deal would distract from the company's core adhesives business.

Ancora, which holds a roughly 1.5 percent stake in H.B. Fuller according to the latest filings, told the board in a letter that the acquisition risked destroying shareholder value. The firm has pushed for a sale of the company or a break-up in the past. Thursday's statement signals that the M&A strategy will face an extended proxy fight.

The target, Advanced Medical Solutions, makes surgical dressings and wound-healing products. H.B. Fuller said the deal would expand its presence in medical adhesives, a higher-margin segment than its traditional industrial and construction markets. Investors clearly saw the logic as strained. The stock dropped to a four-month low, wiping out gains from a rally that began after the company reported fiscal second-quarter results in late June.

Thursday's sell-off erased roughly $250 million in market value, a steep penalty for a deal that H.B. Fuller valued at roughly £700 million including assumed debt. The cash offer price was not disclosed in the company's initial statement. Two people familiar with the matter said it represented a premium of about 25 percent to Advanced Medical Solutions' undisturbed close.

H.B. Fuller has been under pressure to improve margins and return cash to shareholders. The company's last quarterly print showed a decline in organic sales, particularly in the construction and packaging channels. Management lowered full-year guidance. The Q2 report had already raised questions about the pace of recovery in end markets.

Ancora's opposition could force the board to sweeten the bid or walk away, options that would carry their own costs. A higher price would inflate goodwill and lower future returns on capital. A withdrawal could trigger a breakup fee and damage management credibility. The stock's move Thursday suggests the market sees a higher probability of the second outcome.

The acquisition is subject to a shareholder vote and regulatory approvals in the U.K. and the U.S. A special meeting is expected within 60 days. Until then, FUL shares are likely to trade with a discount that reflects the uncertainty around execution and activist pressure.

For context on H.B. Fuller's broader position in the materials sector, see the stock profile. AlphaScala's rating for FUL is currently unscored, reflecting a lack of consensus on valuation and earnings direction among the models.