February 7th, 2010
Air Products bids $5.1 Bn for Airgas
Air Products bids $5.1 Bn for Airgas: ICIS Nigel Davies 05.02.10
HOUSTON (ICIS news)--Shares of Airgas shot up on Friday while those of Air Products fell following news of Air Products’ $5.1bn (€3.7bn) bid to acquire Airgas. Shares of Airgas on the New York Stock Exchange rose by $16.57 to $60.10/share as of 13:33 hours
The total value of the deal would be $7.0bn, including $5.1bn of equity and $1.9bn of assumed debt, Air Products said. “At $60.00 per share, the offer provides a 38% premium to Airgas shareholders based on Thursday's closing price of $43.53 and is 18% above Airgas’ 52-week high,” Air Products said in a statement. In the past four months, Air Products had made two written offers, but they were rejected by Airgas' board of directors, which unanimously determined that the proposals were grossly undervalued and not in the best interests of the company or its shareholders. Air Products has filed a lawsuit in Delaware Chancery Court accusing Airgas directors of breach of fiduciary duty. Air Products said expected cost savings of $250m by the end of year two of the acquisition and said the deal would immediately add to its earnings.
Jefferies & Company analyst Laurence Alexander said that given Airgas’ “takeover defenses, we believe [Air Products] will need to negotiate a friendly deal with [Airgas] in order to consummate a transaction”.
“While we are disappointed that Airgas has thus far prevented its shareholders from receiving a substantial premium and immediate liquidity, we have repeatedly communicated to the Airgas Board our willingness to improve our offer to reflect any incremental value they can demonstrate,” said John McGlade, Air Products’ chairman, president and chief executive. McGlade said the company was committed to pursuing the transaction and was prepared to take all necessary steps to complete it, including making an offer directly to Airgas shareholders. Air Products has already acquired 1,508,255 shares of Airgas, the maximum it could acquire without triggering a mandatory anti-monopoly filing, Jefferies & Company said.
Air Products said it has secured committed financing from its financial adviser, JP Morgan, to complete the offer. In February 2002, Airgas bought the majority of the US packaged gas business of Air Products including nearly 100 facilities in 30 states for $236m in cash. "This deal has tremendous strategic and industrial logic," McGlade said in a conference call with investors. "Synergies would be possible by reducing back office costs and introducing the enterprise management systems already used by Air Products in Europe and Asia to
John Raquet, managing director of industrial gases consultancy Spiritus Consulting, said the acquisition of Airgas would make Air Products a fully integrated industrial gases company. Air Products would gain some value in the supply chain from the acquisition and could gain some efficiencies but Spiritus was concerned that operating margins could be diluted, Raquet said. Spiritus said it expected no major anti-monopoly impact, although there was thought to be some overlap with the bulk liquids operations Airgas acquired from Linde in 2006. That business has annual sales of some $350m, Spiritus said. Linde sold the assets to comply with a US Federal Trade Commission condition put on its acquisition of rival BOC.
However, Jefferies & Company’s Alexander said the transaction could run into anti-monopoly issues concerning Airgas’ on-site and merchant business. Nonetheless, Air Products seemed to be committed to making any necessary divestitures to make the acquisition work. Any anti-monopoly issues would likely revolve around Airgas’ on-site and merchant businesses, with about 10% of Airgas’ sales potentially at risk, Jefferies & Company said.
($1 = €0.73)