HB Fuller Likely To Be Involved In An Adhesives M&A Land Grab

HB Fuller (FUL)  is a $2.5bn American adhesives group being looked at by a number of parties. The company is a prime, quality player in its space, and with annual revenues up to $3bn, ROE is 15%  and growing. Therefore it makes sense for competitors to try and consolidate their position in the adhesives space by taking it over.

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In Europe we have a company called Arkema who are eyeing up HB Fuller. But there is also 3M in the US, and in Germany,  Covestro AG. The main company looking at HB Fuller is Arkema, but clearly 3M has the financial firepower as it is a much larger company. This implies the premium on the current share price could be significant, especially if a bidding battle is triggered. The take out price would likely have to be at least $65.

 

BT / Deutsche Telekom

It is good to see the way that the financial press have cottoned onto the BT / Deutsche Telekom story after it appeared here a couple of weeks back.

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This focuses on the way that the German giant is now free to make a takeover bid for its ailing British counterpart, hit by scandal and incompetance in the recent past.

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The end of the lock up to start this year means that if DT is in the mood to go for BT at a relatively low price, years of underperformance may finally be over. The technical level to break may only be above the December gap through 241.75p. Indeed, it may be worth waiting for this potential trigger point given how much badwill BT shares have attached to them in the market.

Henkel Update – Japanese Interest

After recent coverage here regarding Henkel, there has apparently been some movement. In particular, Henkel’s adhesive business is in focus, with possible interest from ThreeBond  of Japan, and American industry players. As reported before, Unilever looks to be the main contender in the frame should any M&A for the whole of Henkel materialise.

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The shares remain bombed out, and it is therefore common sense that rivals in the sector would be sniffing around. This is especially the case as the company’s own initiatives to extract shareholder value have so far received a mooted response. A takeout price towards €120 looks to be on the cards, any deals that focus on individual parts of the group notwithstanding.

Henkel in the sights of Unilever / private equity

€84 the current share price on Henkel PFD (preference shares). It has been over €115 over the past year– still paying a good dividend. €35bn market cap.

Unilever is looking at the Persil, Right Guard, Pritt owning group, as well as private equity. Henkel is in focus as it has a number of divisions, and with the bombed out share price and multiple brands, it could subsequently be cherry picked by its new owners. Given where the shares are now an offer around €120 a share would be difficult to resist.

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The 143 year old business clearly needs a revamp, despite being one of the oldest German names in consumer products. This would almost certain include focusing the company on a core business, rather than the current all things to all people offering. Indeed, it is the type of opportunity that the late Sir James Goldsmith would probably have liked the look of in terms of a bid to break up the company in asset stripping fashion.

Given the dearth of M&A in the markets due to political and regulatory overkill, this could be just the type of deal to get the City of London moving again. It would also be a good way of Unilever proving that saying no to Kraft Heinz was not a foolish mistake – which it was.

The only issue here is whether private equity would steal its thunder and make a move  on Henkel first, before selling the parts back to the likes of Unilever or Reckitt Benckiser?

The RPC (RPC) Conundrum

There is nothing like the M&A situation which goes to the wire, especially at a time when M&A activity is a shadow of its former self. For plastics packaging group RPC we should know whether the Eagle will land over the next 24 hours, in the form of private equity group Apollo stumping up around £3bn for the UK group. Perhaps the thing to keep in mind here is that it has been a somewhat tortuous journey to tomorrow’s January 23 deadline, which is a deal goes through would make it fifth time lucky after all the extensions. The risk is that the 850p a share that some have been looking for may be a little rich for Apollo, and so some may be disappointed.

At least from a charting perspective while the stock holds the 702p level of the 50 day moving average the main destination here should be of the order of 800p. Of course, given the way that this is a fundamental bet, such detail may not be relevant, Indeed, what could be more noteworthy is the idea that after a difficult gestation period the risk of disappointment is that much greater.

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Morrison (MRW): Holding The Gap

It was officially – on the mainstream financial media – supposed to be the case that Morrison shares rose last week off the back of picking off stores from rivals, and the Amazon takeover reheat. While the stock paused yesterday, today we see it breaking above its 50 day moving average at 230.5p for the first time since September – a significant technical feat. Even better it has held the chart gap to the upside, a sign that those short of the stock were caught out, and remain in pain.

A decent end of day close today above the 50 day line should steer the shares back towards the mid 240p’s in the near term, with or without further speculation regarding the company. It is probably the case that if there was no background M&A noise, there would not have been the improvement / follow on move we are seeing this week.

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