2Q Preview; Expecting a Beat & Raise; Potential AMS Deal Remains An Overhang

Research evidence excerpt

2Q Preview; Expecting a Beat & Raise; Potential AMS Deal Remains An Overhang

view and we see the top end of this range as achievable. We expect this to become

apparent as the combination of 1) lower absolute raws inflation, 2) the lack of a

larger weakening in 2H26 volumes (implied in current guide) and 3) pricing

realization is locked in at/near the 10% targeted range. Risk to the upside here

would be outperformance on pricing, to the downside FUL seeing higher raws

pressure than we're seeing on the rest of specialty chems or greater demand

pressure as 2026 progresses.

The potential AMS deal has been highly debated amongst investors with feedback

skewing more negatively per our convos. Major shareholder Ancora has opposed

the deal because of concerns centered on the increase in leverage to at or above

4.0x which would likely preclude a potential PE takeout scenario until leverage is

reduced; this could be the main potential shorter term value catalyst for the shares.

We see the chances of a strategic buyer coming forward as less likely due to either

1) potential anti-trust concerns from an adhesives industry peer, or 2) FUL portfolio

not being sufficiently attractive from an organic growth perspective for specialty

chem peers. Other debates have centered on 1) overlap of the AMS technology /

geographic portfolio with FUL, 2) need for FUL to potentially trim/divest parts of

the portfolio in BAS/HHC, 3) potential post deal acquisition multiple relative to

FUL's currently depressed trading level.

Outside of the potential PE takeout scenario, we see the catalyst for value

realization as more longer dated, that would need to see FUL 1) progressively

execute on the mix shift strategy towards higher growth/higher margin end