ST. PAUL, Minn.—H.B. Fuller Co. has signed an agreement to purchase Tonsan Adhesive Inc., a Chinese developer and manufacturer of engineering adhesives, for about $230 million.
The transaction is subject to customary closing conditions and regulatory approvals. H.B. Fuller said it is expected to close in the fourth quarter of 2014.
The firm said it will acquire 95 percent of Tonsan, and its four founding shareholders will remain with the firm as part of the leadership team, retaining a minority equity interest.
“Tonsan allows us to enter a very important engineering adhesives segment,” said Jim Owens, H.B. Fuller president and CEO. “This is a high-value, high-end chemistry that brings us new technology in that space as well as an important position with a lot of key customers. It dramatically increases the size of our business in China.”
Tonsan operates two manufacturing facilities in China and employs nearly 500. Owens said the employees will be integrated into H.B. Fuller. Nearly all of Tonsan's business is generated within the country.
“Tonsan has a very strong capital infrastructure and ample space for growth in terms of facilities and laboratories,” Owens said. “The investments we're going to make are to strengthen their growth. We're going to invest in people to call on multinational companies and to transfer technology to Tonsan and from Tonsan to the rest of the world.”
H.B. Fuller—a global adhesives provider that focuses on adhesives, sealants and other specialty chemical products—operates three Chinese manufacturing plants and is constructing a fourth projected to be operational sometime in 2015, Owens said.
Engineering adhesives, however, is a new business for H.B. Fuller. Owens said the firm currently has a limited presence in the market, but according to the executive, China represents about 20 percent of the world market, and Tonsan will expand H.B. Fuller's reach drastically.
Engineering adhesives comprise about 30 percent of the global adhesives market, according to H.B. Fuller, and is expected to grow at rates significantly above the average for the adhesives industry. Owens estimated the growth in the high single digit percent range.
“You need a high level of expertise combined with high performance chemistry to meet the needs of customers,” Owens said. “When you meet these challenging demands, you get better pricing and better margins. It's a high performance business, it's a stable and strong business, and it's also a high growth segment of the market.”
H.B. Fuller said Tonsan is the largest independent engineering adhesives provider in China. It offers silicone, epoxy, anaerobic and cyanoacrylate technologies that will facilitate H.B. Fuller's global entry into the segment.
Tonsan serves the transportation—automotive, rail and shipbuilding—market in addition to the machinery, photovoltaic, electronics and electrical industries.
“They're one of the strongest players around the world from a technology standpoint,” Owens said. “They have technology that's been accepted for some of the most demanding applications that exist from an adhesives standpoint.”