Adco Global in early stages of sale process

This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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Adco Global, a Michigan Center, Michigan-based chemical company owned by Aurora Capital, is beginning a sale process, two industry bankers and a lawyer told mergermarket.

The two bankers did not mention an advisor. The first banker said he did not think one had been chosen yet, though he was aware that Aurora was about to put the company on the block. The lawyer said he thought William Blair was advising on the sale process but wasn’t certain.

Aurora formed Adco Global, a supplier of specialty adhesives, sealants, tapes, and coatings, through a series of acquisitions in 1999 and 2000, according to the PE firm’s website. Aurora declined to comment. Adco and Blair did not respond to requests for comment.

Adco generates about USD 50m in EBITDA, the second banker said. An industry source familiar with Adco said he had not heard of a sale process and described Adco as “a nice-sized company with a nice European footprint to it.” He declined to specify its revenue. According to an online profile, the company had USD 270m in revenue in 2007.

In terms of potential bidders, the industry source pointed to Bostik because it has overlapping lines of business with Adco, especially in window and construction segments. He also suggested Henkel, but said it is less likely to be interested because there is less overlap. A third possibility is H.B. Fuller, but Fuller just made an acquisition of Forbo so its plate might be full at the moment, the source said.

A private equity investor who had not heard about the sale process said that “these kind of businesses trade for six times (EBITDA)-plus if it’s sizable.” He pointed to Audax and Moelis’s spring 2011 acquisition of Quest Specialty Chemicals as a comparable deal, though Adco is more diversified than Quest, the PE investor said. He suggested Adco would be more suited to a private equity buyer than a strategic because there might not be one strategic interested in all of its segments. It serves construction, transportation and industrial markets, according to Aurora’s website.

Adco is “very well run” but is unlikely to command a premium multiple because not all of its segments have higher than average multiples, the industry source said. The company has bought some small adhesive manufacturers, so an acquisition by a private equity group would allow it to continue that strategy, he said. Asked which PEs might be interested in Adco, he said there was a long list.

In December 2010, Adco Global, through its Michigan-based operating subsidiary Adco Products, acquired EternaBond, based in Mundelein, Illinois, a maker of high-performance sealants and tapes for OEM and repair applications.

Adco has operating subsidiaries in North America and Germany, according to the Aurora website. ADCO’s CEO, John Knox, joined the company in December 2006 after previously working at Sovereign Specialty Chemicals and Valspar Corporation.

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