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Air Liquide to acquire Airgas for $13.4 billion

November 18, 2015
Chemical Value Chain

Air Liquide says it has agreed to acquire Airgas for $13.4 billion, in a deal that would create one of the largest industrial gases firms in the United States.

The purchase price, which values Airgas at $143/share, represents a premium of 50.6% on Airgas’ average share price over the past month. Airgas’ market capitalization is around $8 billion, and the company generated about $5.30 billion in sales, $368.1 million in net earnings, and $641.3 million in operating income for its most recent fiscal year.

Shares in Airgas spiked this morning immediately after a Bloomberg report appeared speculating that the deal was imminent. Airgas shares jumped from about $106/share earlier this morning to about $114/share after noon US eastern time, and halted trading shortly thereafter as a result of the report. Airgas is currently trading at around $137/share.

The deal increases Air Liquide’s presence in the United States, a market CEO Benoit Potier called “resilient.” The acquisition will also increase Air Liquide’s sales in gases and services by about 30%, the company says. It is expected to be accretive to Air Liquide’s earnings within a year of closing. The timing of the close has not been announced, but “the two parties with to proceed swiftly,” according to Air Liquide.

Air Liquide will fund the acquisition with a refinancing, comprising of a €3-4 billion ($3.2-4.25 billion) capital increase, as well as US dollar and euro-denominated long-term bonds. The company also has committed bridge financing for the acquisition. Cost savings from the deal are expected to total about $300 million/year, pre-tax, within the first three years.

Airgas “always had a desire to expand our reach beyond U.S. border, but product sourcing was a significant hurdle,” executive chairman Peter McCausland said in a letter to employees today. Air Liquide is the second-largest global industrial gases producer by sales, after Germany’s Linde. The acquisition significantly expands Air Liquide’s business in the packaged gases market in the United States, where Airgas has the top position with a 25% market share. Air Liquide had about $4.15 billion in sales in the Americas in 2014, but is much smaller than Airgas in packaged gases in the US.

Many European chemical companies have come to view North America as a growth market because of its low-cost energy, strong manufacturing sector, and steady, if still slow, economic growth. Over the summer, Solvay agreed to acquire US-based Cytec for $6.4 billion, expanding its presence in North America and in the composites space.

Barclays and BNP Paribas are Air Liquide’s financial advisors, while Cleary Gottlieb Steen & Hamilton are its legal advisors. Goldman Sachs and Bank of America Merill Lynch are acting as financial advisors to Airgas, while Wachtell, Lipton, Rosen & Katz is Airgas’ legal advisor. Barclays and BNP Paribas are also underwriting the bridge financing.

Airgas was the subject of a $70/share hostile bid by Air Products in 2010 and early 2011.

By Vincent Valk

Source: Chemical Week

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