Business & Deals

Air Products Makes Unsolicited Bid to Acquire Airgas

Air Products has made an unsolicited bid to acquire Airgas for $7 billion in cash. The proposed deal would create the biggest industrial gases company in North America.

The $60/share offer was made yesterday in a letter to the Airgas board. Two previous written offers, and Air Products' requests to discuss them, were rejected by Airgas, Air Products says.
The offer price is a 38% premium over Airgas's closing price yesterday of $43.53/share and 18% above Airgas's 52-week high. The bid comprises $5.1 billion of equity and $1.9 billion of assumed debt. Air Products expects the proposed acquisition to be immediately accretive to the company's earnings per share, excluding expected one-time costs.

The combined entity "would be one of the largest industrial gases companies in the world, with distinctive strengths across all geographies and in all three distribution channels: packaged gases, liquid bulk, and tonnage," Air Products says. Air Products has a "large and profitable" packaged gas business in Europe and other key international markets, but it does not have a position in the U.S. packaged gas business, where Airgas is the market leader. Air Products has a leading international position in liquid bulk and tonnage gases.

Synergies leading to annualized cost savings of $250 million are expected by the end of year two. Air Products anticipates "the ability to accelerate growth domestically and internationally by leveraging Airgas's extensive U.S. sales force and packaged gases skills on the foundation of Air Products' global presence and infrastructure." Airgas would be positioned to achieve higher growth than it could achieve on a stand-alone basis, Air Products says.

Air Products says it has secured financing from JP Morgan to complete the offer, and that it is prepared to make "appropriate divestitures" to address regulatory issues. "Bringing together these two highly complementary companies would create substantial value," says John E. McGlade, chairman, president, and CEO at Air Products. "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. While it remains our strong desire to reach an agreement with Airgas on a friendly basis, we are fully committed to pursuing this transaction and are prepared to take all necessary steps to complete it, including making an offer directly to Airgas shareholders."

McGlade wrote in yesterday's letter, addressed to his Airgas counterpart Peter McCausland, that Air Products has been "trying for four months to engage Airgas in friendly discussions regarding a business combination," and that Airgas "refused even to discuss our offers."

Air Products' financial advisor for the proposed transaction is JP Morgan Securities, and its legal advisors are Cravath, Swaine & Moore LLP and Arnold and Porter LLP.

By Ian Young

Source: Chemical Week