H. B. Fuller Company · NYSE:FUL
H. B. Fuller — Fuller H B — Debt Investor Presentation (October 2017)
47 slides from H. B. Fuller's debt investor presentation, Oct 2, 2017
Slide 1: H.B. Fuller Lender's Presentation October 2017
Exhibit 99.1 H.B. Fuller Lender’s Presentation October 2017
Slide 2: Today's Presenters
Today’s Presenters John Corkrean Executive Vice President and Chief Financial Officer Jim Owens President and Chief Executive Officer
Slide 3: Safe Harbor for Forward-looking Statements
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 fo
Slide 4: Agenda
Agenda 1 3 5 6 2 4 Transaction Overview Key Credit Highlights Closing Remarks and Q&A Appendix Introduction to Royal Adhesives Historical Performance Overview
Slide 5: Transaction Overview
Transaction Overview Section 1
Slide 6: Acquisition of Royal Adhesives & Sealants announced
On September 4, 2017, H.B. Fuller Company (“H.B. Fuller”) announced the signing of a definitive agreement to purchase Royal Adhesives & Sealants (“Royal”) for $1.575 billion on a cash free/debt free basis Acquisition multiple of 11.4x Royal’s LTM 6/30/17 Adjusted EBITDA of $138 million 9.1x after co
Slide 7: Acquisition Funded via New Debt Facilities
Acquisition to be funded via newly issued debt facilities – expected closing total leverage of 5.5x LTM Adjusted EBITDA including run-rate synergies(1) Proven track-record of disciplined deleveraging following acquisitions Expected post closing debt structure: $1,850 million Term Loan B New issuance
Slide 8: Term Loan B summary terms
Borrowers: H.B. Fuller Company Use of Proceeds: To finance the acquisition of ASP Royal Acquisition Corp and pay related fees and expenses Guarantors: All Domestic Material Subsidiaries of the Borrower Security: Secured on a first priority basis in substantially all assets of the Borrower and the Gu
Slide 9: Legal Structure Chart
Legal Structure Chart HB Fuller Company (US) (“Borrower”) HBF International, Inc. (US) Sekisui‐Fuller Co. Ltd. (JV) (Japan) Wisdom Adhesives LLC (US) HBF Realty Corporation (Philippines) HBF Singapore Pte. Ltd. (Singapore) (6) HBF (Philippines) Inc. (Philippines) HBF Construction Products Inc. (US)
Slide 10: Syndication Timetable
Syndication Timetable October 2017 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Key Dates Market Holiday Key Days October 2nd Transaction Launch via Bank Meeting October 12th Commitments due from Lenders October 20th Close and Fund
Slide 11: How We Win and Financial Targets
Gain market share through application expertise and strong customer relationships Increase global growth with greater share in emerging markets and engineering adhesives Innovate to address existing market opportunities and capitalize on emerging trends Build best-in-class supply chain capabilities
Slide 12: Huge Value Creation Opportunity for Investors
Huge Value Creation Opportunity for Investors Significantly shifts portfolio toward high value, specified adhesive applications in Engineering, Construction and Durable Assembly. Immediate improvement in EBITDA margin, cash flow, and revenue. EPS accretive in 2018. Delivers cost synergies of $35 mil
Slide 13: Introduction to Royal Adhesives
Introduction to Royal Adhesives Section 2
Slide 14: Royal Company Overview
16 18 21 21 Net Sales LTM June 30, 2017 Financials $636 million Revenue $138 million Adjusted EBITDA $121 million Free Cash Flow(1) Company Overview Pure play adhesives and sealants company ranked in the top 10 Headquartered in South Bend, IN 19 manufacturing facilities across 5 countries on 3 conti
Slide 15: Royal Operating Segments and Geographies
Based on Royal fiscal calendar. Adjusted EBITDA is a Non-GAAP financial measure. Operating Segments Geographies LTM June 30, 2017 Results(1) Sales:$636 million Adjusted EBITDA(2):$138 million Margin:21.7% Product Line Applications Engineering 20% Construction Adhesives 33% Durable Assembly 34% Packa
Slide 16: Strong Historical Growth and Profitability
Strong Historical Growth and Profitability Royal Pro Forma Financial Performance (2014 - LTM 6/30/2017 in USD million) Adjusted EBITDA is a Non-GAAP financial measures Stable organic growth and solid EBITDA growth over the past number of years Adjusted EBITDA(1) Net Sales ~4% CAGR vol. +4% CAGR +14%
Slide 17: Diversified Global Business Footprint
Diversified Global Business Footprint R&D and Manufacturing Facility Manufacturing Facility Michigan Center, MI Butyl, PIB, Hot Melt, Solvent-Based, Water-Based, Acrylic South Bend, IN Solvent-Based, Low Volatile Organic Compounds, Reactive, Water-Based Chagrin Falls, OH Polyurethane, MicroSealant T
Slide 18: Highly Experienced Management Team
18 Highly Experienced Management Team with Strong Track Record of Results Management team has an average of 25+ years of relevant experience VP Human Resources 23 years in industry 6 years at Royal VP Operations, EH&S 33 years in industry 33 years at Royal EVP & CFO 28 years in industry 2 years at R
Slide 19: Key Credit Highlights
Key Credit Highlights Section 3
Slide 20: Key Credit Highlights
Key Credit Highlights Larger, More Diversified Enterprise with Greater Cash Flow Stability Revenue from $2.2 billion to $2.8 billion Adjusted EBITDA from $282 million to $455 million, including $35 million of run-rate synergies to be achieved by 2020 Royal competes in end-markets which are complimen
Slide 21: Larger, More Diverse Enterprise: Enhanced Financial Profile
$ MM 35 cost synergies(2) 1 Larger, More Diverse Enterprise: Enhanced Financial Profile $ MM Pro Forma Adjusted EBITDA – LTM(1) Pro Forma Revenue – LTM (1) Pro Forma Pro Forma Transaction expected to be accretive to earnings in 2018 As of September 2, 2017 for H.B. Fuller and June 30, 2017 for Royal
Slide 22: Growth in Focus, High Margin End Markets
Larger, More Diverse Enterprise: Growth in Focus, High Margin End Markets 1 Enhanced End Market Exposure (Revenue Breakdown) Improved Scale (Adjusted EBITDA) 2010 ($1.3 billion) 2016 ($2.1 billion) 2020 Target ($3.2 billion) $ MM
Slide 23: Enhanced Customer Diversity
Larger, More Diverse Enterprise: Enhanced Customer Diversity 1 No customer accounts for more than 5% of Pro Forma revenue Top 50 customers account for 23% of revenue Top 5 customers account for less than 11% of revenue Top 25 Customers in Pro Forma Revenue
Slide 24: Singular Focus: #1 Pure Play Industrial Adhesives Company
Singular Focus: #1 Pure Play Industrial Adhesives Company 2 Adhesives Revenue of Main Industry Participants $ Bn
Slide 25: Diverse exposure to the Global Industrial Economy
Singular Focus Diverse exposure to the Global Industrial Economy Direct presence in 44 countries; customers in over 100 geographies Sales into 40 end markets- from hygiene to aerospace Low cyclicality; consumable products Long history of winning with customers to create specified solutions in highly
Slide 26: End Market Specialization
Hygiene Construction Adhesives Engineering Adhesives Durable Assembly Packaging Singular Focus: End Market Specialization LTM with Royal (1) $2.8 Bn Revenue 2 As of September 2, 2017 for H.B. Fuller and June 30, 2017 for Royal
Slide 27: Technology Portfolio Capabilities – Hygiene
Singular Focus: Expands Technology Portfolio Capabilities – Hygiene 2 Trends Driving Innovation Thinner materials and products Odor control through adhesives additives Stretch and movability Delivering enhanced functionality to meet changing consumer demands
Slide 28: Technology Portfolio Capabilities – Packaging
Singular Focus: Expands Technology Portfolio Capabilities – Packaging 2 Extending our application capabilities in new or adjacent applications Labelling & Packaging Adaptability and easy wash-off properties Low environmental profile, versatility and performance across a range of climates Addresses c
Slide 29: Technology Portfolio – Engineering Adhesives: Mobile Electronics
Mobile Electronics Work to solve customer design challenges Leverage expertise across applications and technologies Deliver adhesive solutions for multiple product development programs Singular Focus: Expands Technology Portfolio Capabilities – Engineering Adhesives 2
Slide 30: Technology Portfolio – Engineering Adhesives: Aerospace Sealants
Singular Focus: Expands Technology Portfolio Capabilities – Engineering Adhesives 2 Advanced Aerospace Sealants Perform well under demanding industry requirements 33% quicker curing time than previous solutions Resistance to aviation fuel and other chemical and petroleum products
Slide 31: Technology Portfolio – Durable Assembly: Insulating Glass
Energy Efficient Insulating Glass Drive toward energy efficiency has led to increased performance demands Triple pane glass is a growing trend in Germany and around the world Latest spacer technology requires highly specified adhesives Singular Focus: Expands Technology Portfolio Capabilities – Dura
Slide 32: Well Developed Integration Process with Clear Priorities
Proven Integration Success: Well Developed Integration Process with Clear Priorities 3 Protecting & growing the base business is more important than headcount synergies Align Integration Projects with existing HB Fuller segment structure in order to align accountability, project plans and resources.
Slide 33: Experienced Acquirer – Successful Business Integration
3 Proven Integration Success: Experienced Acquirer – Track-record of Successful Business Integration Forbo (2012) TONSAN (2015) Closed 11 manufacturing locations Significantly reduced SKU count Consolidated back office Successfully maintained top talent to drive local relationships Maintained signif
Slide 34: Disciplined Deleveraging Following Acquisitions
3 Proven Integration Success: Disciplined Deleveraging Following Acquisitions Gross Debt to EBITDA – Bank Covenant Definition Forbo TONSAN
Slide 35: Improves and Broadens Portfolio Mix
4 Expanded Position: Improves and Broadens Portfolio Mix Expands Engineering Adhesives presence into Aerospace and other high value segments. Increases geographic presence in Engineering Adhesives in the Americas and Europe. Provides small pack capabilities for reactive systems in the US. Provides a
Slide 36: Portfolio Shift to Highly Specified Adhesive Applications
+ = The addition of Royal increases highly specified business from 44% of a $2.2 billion portfolio to 53% of a $2.84 billion portfolio 4 Expanded Position: Portfolio Shift to Highly Specified Adhesive Applications
Slide 37: Enhanced Global Footprint
4 Expanded Position: Enhanced Global Footprint Royal H.B. Fuller EUROPE: Efficient, versatile German site and specialty UK site add new competencies and capabilities NORTH AMERICA: Unique production and packaging capability will accelerate growth in engineering adhesives ASIA and EMERGING MARKETS: O
Slide 38: Robust Cost and Growth Opportunities
5 Compelling Synergies: Robust Cost and Growth Opportunities Expect cost synergies alone of $35 MM+ to by achieved by 2020 Quick win price harmonization and strategic sourcing of raw materials Manufacturing synergies achieved through creation of technology driven centers of excellence SG&A synergies
Slide 39: Procurement Synergies
5 Compelling Synergies: Procurement: Most of $20 MM+ synergies identified across raw material, packaging & indirect can be captured early Procurement Levers Quick win price harmonization 1a Indirect consolidation and sourcing 3 Procurement organization consolidation 4 Raw material strategic sourcing
Slide 40: Growth Synergies
5 Compelling Synergies: Growth: Synergies are centered in H.B. Fuller’s Engineering Adhesives and Durable Assembly business units Growth Synergy Overview Cross-selling of Royal engineering adhesives through H.B. Fuller channels in China, India and Emerging Markets Cross-selling of Royal and TONSAN s
Slide 41: Return to Investment Grade Metrics
6 Consistent Financial Principles: Return to Investment Grade Metrics Committed to return to investment grade credit metrics through aggressive debt paydown Strong cash flow conversion profile and lack of asset intensity at both H.B Fuller and Royal allows flexibility to pursue debt paydown Pro form
Slide 42: Key Credit Highlights
Key Credit Highlights Larger, More Diversified Enterprise with Greater Cash Flow Stability Revenue from $2.2 billion to $2.8 billion Adjusted EBITDA from $282 million to $455 million, including $35 million of run-rate synergies to be achieved by 2020 Royal competes in end-markets which are complimen
Slide 43: Historical Performance Overview
Historical Performance Overview Section 4
Slide 44: HB Fuller Standalone: Historical Financials
HB Fuller Standalone: Historical Financials Adjusted EBITDA Revenue Adjusted EBITDA Minus Capex Capex As of September 2, 2017 (1) (1) (1) (1)
Slide 45: Pro Forma LTM Financials
Pro Forma LTM(1) Financials Adjusted EBITDA Revenue Adjusted EBITDA Minus Capex Capex As of September 2, 2017 for H.B. Fuller and June 30, 2017 for Royal Cost synergies to be achieved by 2020 (2) (2)
Slide 46: Closing Remarks and Q&A
Closing Remarks and Q&A Section 5
Slide 47: Closing Remarks
Closing Remarks Royal Adhesives & Sealants is a pure-play adhesives and sealants company with a top 10 market position Acquisition significantly shifts portfolio toward high value specified adhesive applications in Engineering, Construction and Durable Assembly Immediate improvement of EBITDA margin
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