Note 2 - Acquisitions and Divestiture

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 2: Acquisitions and Divestiture

Ramapo Sales and Marketing, Inc.

On May 17, 2019, we acquired certain assets from a window and insulating glass sealants sales and distribution company, Ramapo Sales and Marketing, Inc. (“Ramapo”), headquartered in Charleston, South Carolina. This acquisition supports the integration of the insulating glass business that we acquired as part of the Royal Adhesives acquisition. The purchase price of $8,292 was funded through existing cash. In addition, we are required to pay up to $3,400 in contingent consideration based upon financial results for the twelve months ended December 31, 2019. Existing receivables of $2,166 from Ramapo were effectively settled as a result of the acquisition. The acquisition fair value measurement was preliminary as of November 30, 2019, which includes goodwill of $910, customer relationship intangible of $8,800, and additional acquired assets of $4,148. Goodwill is deductible for tax purposes. Ramapo and the related goodwill are reported in our Americas Adhesives operating segment.

Dalton Holdings, LLC

On July 1, 2019, the Company completed the sale of Dalton Holdings, LLC (“Dalton Holdings”), which primarily manufactures surfactants and thickeners, within the Americas Adhesives segment. The sale resulted in a pre-tax gain on sale of $18,764, which is recorded in other income (expense), net in the Consolidated Statements of Income for the year ended November 30, 2019.

Adecol

On November 1, 2017, we acquired Adecol Industria Quimica, Limitada (“Adecol”), headquartered in Guarulhos, Brazil. Adecol works with customers to develop innovative, high-quality hot melt, reactive and polymer-based adhesive solutions in the packaging, converting and assembly markets. The initial purchase price was 145.9 million Brazilian real, or approximately $44,682, and was funded through borrowings on our revolving credit facility and existing cash. During 2018, we received 3.6 million Brazilian real, or approximately $1,110, of cash, and made other purchase accounting adjustments of $3,227 resulting in a final purchase price of $40,345. Adecol is reported in our Americas Adhesives operating segment. We incurred acquisition related costs of approximately $951, which were recorded as SG&A expenses in the Consolidated Statement of Income for the year ended December 2, 2017.

The following table summarizes the final fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

	Final Valuation December 1, 2018
Current assets	$	16,137
Property, plant and equipment		8,047
Goodwill		21,401
Other intangibles
Customer relationships		16,633
Trademarks/trade names		1,298
Other assets		4,811
Current liabilities		(14,274	)
Other liabilities		(13,708	)
Total purchase price	$	40,345

The expected lives of the acquired intangible assets are 13 years for customer relationships and five years for trademarks/trade names.

Based on the fair value measurement of the assets acquired and liabilities assumed, we allocated $21,401 to goodwill for the expected synergies from combining Adecol with our existing business. Such goodwill is not deductible for tax purposes. The goodwill was assigned to our Americas Adhesives operating segment. 

Royal Adhesives

On October 20, 2017, we acquired Royal Adhesives and Sealants (“Royal Adhesives”), a manufacturer of high-value specialty adhesives and sealants. Royal Adhesives is a supplier of industrial adhesives in a diverse set of end markets, including aerospace, transportation, commercial roofing, insulating glass, solar, packaging and flooring applications and operates 19 manufacturing facilities in five countries. The initial purchase price of $1,622,728 was funded through new debt financing. See Note 6 for further information on our debt financing. During 2018, we received $2,389 of cash adjusting the purchase price to a final purchase price of $1,620,339. Royal Adhesives is reported in multiple operating segments. We incurred acquisition related costs of approximately $11,625, which were recorded as SG&A expenses in the Consolidated Statement of Income for the year ended December 2,2017.

The following table summarizes the final fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

	Final Valuation December 1, 2018
Accounts receivable	$	65,896
Inventory		93,485
Other current assets		59,297
Property, plant and equipment		118,783
Goodwill		867,743
Other intangibles
Developed technology		59,700
Customer relationships		664,700
Trademarks/trade names		31,000
Other assets		1,400
Accounts payable		(38,759	)
Other current liabilities		(33,483	)
Other liabilities		(269,423	)
Total purchase price	$	1,620,339

The expected lives of the acquired intangible assets are 15 years for developed technology, 18 years for customer relationships and 15 years for trademarks/trade names.

Based on the fair value measurement of the assets acquired and liabilities assumed, we allocated $867,743 to goodwill for assembled workforce and the expected synergies from combining Royal Adhesives with our existing business. The goodwill was assigned to multiple operating segments. The amount of goodwill that is deductible for tax purposes is $41,638. The remaining goodwill is not deductible for tax purposes.

The following unaudited pro forma information gives effect to the Royal Adhesives acquisition as if the acquisition was in effect for the year ended December 2, 2017. The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition, supportable and expected to have a continuing impact on the combined results. Pro forma earnings for the year ended December 2, 2017 was adjusted to exclude $62,985 (pre-tax) of acquisition-related costs and $10,812 (pre-tax) of nonrecurring expense related to the fair value adjustment of acquisition-date inventory. The unaudited pro forma results do not include any anticipated cost savings from operating efficiencies or synergies that could result from the acquisition. Accordingly, the unaudited pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the period presented. The unaudited pro forma information for the year ended December 2, 2017, assuming that the acquisition was in effect for the year ended December 2, 2017, is presented below:

	December 2, 2017
Net revenue	$	2,886,762
Net income attributable to H.B. Fuller		123,618
Pro forma earnings per share:		2.45
Basic		2.39
Diluted

Wisdom Adhesives

On January 27, 2017, we acquired substantially all of the assets of H.E. Wisdom & Sons, Inc. and its affiliate Wisdom Adhesives Southeast, L.L.C., (“Wisdom Adhesives”) headquartered in Elgin, Illinois. Wisdom Adhesives is a provider of adhesives for the packaging, paper converting and durable assembly markets. The purchase price of $123,549 was financed through borrowings on our revolving credit facility and is reported in our Americas Adhesives operating segment. We incurred acquisition related costs of approximately $555, which were recorded as SG&A expenses in the Consolidated Statement of Income for the year ended December 2, 2017.

The following table summarizes the final fair value measurement of the assets acquired and liabilities assumed as of the acquisition date:

	Final Valuation
	December 2, 2017
Current assets	$	13,844
Property, plant and equipment		8,641
Goodwill		59,826
Customer relationships		45,300
Trademarks/trade names		4,400
Current liabilities		(8,462	)
Total purchase price	$	123,549

The expected lives of the acquired intangible assets are 15 years for customer relationships and 10 years for trademarks/trade names.

Based on the fair value measurement of the assets acquired and liabilities assumed, we allocated $59,826 to goodwill for the expected synergies from combining Wisdom Adhesives with our existing business. Such goodwill is deductible for tax purposes. The goodwill was assigned to our Americas Adhesives operating segment.