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Air Products Offers to Acquire Airgas for $60.00 Per Share in Cash February 5, 2010 – Air Products has offered to acquire Airgas, Inc. for $60.00 per share in cash, or approximately $7 billion total. The offer was made in a letter to Airgas’ Board of Directors yesterday after the CEOs of the two companies had previously discussed Air Products’ interest in acquiring Airgas and after Air Products had made two written offers, and these offers and Air Products’ requests to discuss them were rejected by Airgas.
At $60.00 per share, the offer provides a 38 percent premium to Airgas shareholders based on yesterday’s closing price of $43.53 and is 18 percent above Airgas’ 52-week high. The total value of the transaction is approximately $7 billion, including $5.1 billion of equity and $1.9 billon of assumed debt. The acquisition is expected to be immediately accretive to Air Products’ earnings per share on both a GAAP and cash basis, excluding expected one-time costs.
Air Products’ offer fully values Airgas’ complementary capabilities and attractive long-term prospects. Headquartered in Pennsylvania, the combined company would be the largest industrial gas company in North America and one of the largest in the world, with distinctive strengths across all geographies and in all three distribution channels: packaged gases, liquid bulk and tonnage. A combination of the two companies would be financially and strategically compelling, with substantial cost synergies of $250 million by the end of year two, and the ability to accelerate growth both domestically and internationally by leveraging Airgas’ extensive US sales force and packaged gases skills on the foundation of Air Products’ global presence and infrastructure.
Air Products is fully committed to pursuing this transaction, and has secured committed financing from J.P. Morgan to complete the offer. Air Products is prepared to make appropriate divestitures to address regulatory issues.
John E. McGlade, Air Products’ Chairman, President and Chief Executive Officer, said, “This is an extremely compelling transaction with undeniable strategic and industrial logic that would benefit shareholders, customers, and employees of both companies. Bringing together these two highly complementary companies would create substantial value. We highly value the talented operating team at Airgas, and believe they would benefit greatly from the expanded opportunities and resources available to them as part of a larger and stronger global US company with significantly greater long-term growth prospects than a stand-alone Airgas. 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.”
Air Products’ financial advisor for this transaction is J.P. Morgan Securities Inc. and its legal advisors are Cravath, Swaine & Moore LLP and Arnold & Porter LLP.
The management of Air Products will host a conference call and live webcast, Friday, February 5, 2010 at 8:30 a.m. ET to discuss this announcement. The company welcomes all members of the investment community to listen to the call live by dialing (913) 312-0685 and providing the passcode 4248658. The live webcast of the call can be accessed at www.airproducts.com. An audio replay of the call will be available after the call’s conclusion and can be accessed by calling (888) 203-1112 in the US or (719) 457-0820 outside the U.S. and entering the passcode 4248658.
Below is the full text of the most recent letter from Air Products to Airgas:
February 4, 2010
Mr. Peter McCausland
Chairman, President and CEO
Airgas, Inc.
259 North Radnor-Chester Road, Suite 100
Radnor, PA 19087-5283
Dear Peter:
As you know, we have been trying for the last four months to engage Airgas in friendly discussions regarding a business combination. We are deeply disappointed that you and your board have rejected out of hand two written offers providing your shareholders substantial premiums. In our prior correspondence, we clearly and repeatedly stated our flexibility as to both value and form of consideration, yet you have continued to refuse even to discuss our offers. Your unwillingness to engage has delayed the ability of your shareholders to receive a substantial premium. We remain committed to completing this transaction, and we have therefore decided to inform your shareholders of our offer to expedite the process.
Air Products is prepared to proceed with a fully financed, all-cash offer for all Airgas shares at $60.00 per share, which reflects a premium of 38 percent to Airgas’ closing price today of $43.53 and 18 percent above its 52-week high. In addition to a substantial premium, Airgas shareholders will benefit from immediate liquidity in an uncertain economic environment through an offer which we believe fully values Airgas’ complementary capabilities and long-term growth prospects.
Bringing together our complementary skills and strengths will create one of the world’s leading integrated industrial gas companies. Combining Air Products’ global leadership in liquid bulk and tonnage gases with Airgas’ leadership in US packaged gases will create the largest industrial gas company in North America and one of the largest globally – a leader with distinctive strengths and world-class competencies across all distribution channels and geographies. While we have a strong and profitable packaged gas business in Europe and other key international markets, we do not have a position in the US packaged gas business where Airgas is the market leader. As part of this uniquely compelling combination, Airgas would be well positioned to achieve higher growth than it could achieve on a stand-alone basis.
We do not believe there are any significant financial or regulatory impediments to your shareholders’ timely realization of this substantial cash premium. We have secured committed financing from J.P. Morgan to complete the offer and are committed to maintaining a robust capital structure. We have also thoroughly considered the regulatory issues related to this combination and are prepared to make appropriate divestitures, none of which we expect to be material.
The strategic and industrial logic of this combination is clear, and we are confident that an Air Products/Airgas combination would create greater value than Airgas or Air Products could each achieve on its own. There are many advantages to consummating this combination now, including:
• The opportunity to improve growth, returns and cash generation.
• Substantial cost synergies, which are expected to yield savings of $250 million annually when fully realized, primarily related to reductions in overhead and public company costs, supply chain efficiencies, and better utilization of infrastructure.
• The ability to leverage Airgas’ extensive US sales force and packaged gases skills, and to build on the foundation of Air Products’ global presence and infrastructure, to accelerate growth both domestically and internationally.
• An integrated platform better able to capture economies of scale from extensive engineering, operations and back office capabilities with a much greater reach and ability to provide better overall customer service.
• Air Products’ presence in all of the world’s key industrial gas markets, increased cash flow and greater access to capital would allow Airgas to achieve international expansion far faster and at a much lower cost, while accelerating its growth through acquisitions.
We believe the timing for this combination is ideal. The economy is just beginning to emerge from recession, and together we would be able to take full advantage of the substantial growth potential, economies of scale, and synergies unique to this transaction. You have made clear your international growth aspirations, which will require significant time and expense to build out on your own. Air Products has the global infrastructure in place that would allow you to achieve your goals faster and better. Airgas is also just in the initial stages of implementing SAP, and our demonstrated expertise in this area would greatly reduce the time, expense and disruption associated with this vital rollout.
Bringing our two companies together would also benefit employees, customers and the communities in which we operate. We highly value the talented operating team at Airgas, which would benefit greatly from the expanded opportunities and resources available as part of a larger and stronger global US company headquartered in Pennsylvania – with significantly greater long-term growth prospects than a stand-alone Airgas. Your customers would benefit from a more robust product offering from a company with expanded resources and global scope.
Peter, let me reemphasize as I have in past discussions that Air Products is fully committed to the successful completion of this compelling transaction. Your continuing refusal to engage with us will serve only to further delay your shareholders’ ability to receive a substantial all-cash premium. While we would strongly prefer to proceed through friendly negotiations, you should not doubt our resolve to take the necessary actions to complete this transaction. We would welcome the opportunity to meet with you or with any special committee of your independent directors which has been or will be formed to consider our offer, as well as their independent financial and legal advisors. Finally, we reiterate our willingness to reflect in our offer any incremental value you can demonstrate.
Very truly yours,
John E. McGlade
Chairman, President and Chief Executive Officer
cc: Airgas Board of DirectorsView more Full story: www.airproducts.com/airgasoffer Airgas Confirms Receipt of Unsolicited Proposal from Air Products February 5, 2010 – Airgas, Inc. today confirmed that it has received an unsolicited proposal from Air Products & Chemicals, Inc. to acquire the company for $60.00 per share.
Airgas’ Board of Directors will review the proposal with its financial and legal advisors. Airgas shareholders are advised to take no action at this time.
The Company noted that in December 2009 Airgas received a cash and stock proposal from Air Products with an implied value of $62 per share, and that in October 2009 Airgas received an all-stock proposal from Air Products with an implied value of $60 per share. Airgas’ Board of Directors, after consultation with its financial and legal advisors, unanimously determined that Air Products’ proposals were not in the best interests of Airgas or its shareholders, as they grossly undervalued Airgas. In responding to the proposal received in December, the Board also noted that a significant portion of the consideration was in the form of Air Products stock, which has historically underperformed Airgas stock. The Airgas Board informed Air Products of its determination, sending the following letter on January 4, 2010 to John McGlade, Air Products’ Chairman, President and Chief Executive Officer:
January 4, 2010
Mr. John E. McGlade
Chairman, President, and CEO
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195
Dear John:
Our Board of Directors met and thoroughly considered the proposal set forth in your December 17 letter. It is their unanimous view that the Air Products proposal grossly undervalues Airgas. Therefore, the Board is not interested in pursuing your company’s proposal and continues to believe that there is no reason to meet.
Airgas’ management has consistently created long-term shareholder value, as measured by stock price appreciation and total shareholder returns (stock price appreciation plus dividends).
- In every cumulative annual period since 2000, measured from the first of each calendar year to Dec 31, 2009, Airgas’ stock price has consistently outperformed Air Products’ with the exception of 2009.
- Airgas’ stock price appreciated 80 percent over the last five years and 415 percent over the last ten years, compared to just 40 percent and 145 percent for Air Products’ shares over the same periods.
- Airgas has achieved total cumulative shareholder returns of 22, 89, and 434 percent over the last three, five, and ten years respectively, versus Air Products’ 23, 56 and 197 percent. From the time of its initial public offering in December 1986, Airgas’ total shareholder return has exceeded 4,400 percent as compared to approximately 1,300 percent for Air Products over the same period.
Airgas’ entrepreneurial culture and customer-centric business model produced operating performance superior to that of Air Products through the last cycle, in expanding and contracting economic conditions. From CY2001 through CY2008, Airgas generated a 24 percent compound annual growth rate in operating income from continuing operations, compared to Air Products’ 8 percent.
Airgas’ associates, with the support of our Board of Directors and shareholders, have built the most valuable independent industrial gas company in the world. We have an outstanding performance record, and strong prospects for organic and acquisition growth in the coming years. Air Products’ unsolicited approach is simply an opportunistic attempt to buy Airgas at a bargain price, exploiting a brief anomaly in the historic comparative equity market performance of our two companies, just as the economy begins its recovery. Recent performance alone is not indicative of what our respective companies are capable of achieving. Under the terms of Air Products’ proposal, our shareholders would sacrifice real value and opportunity, and exchange a dynamic growth stock for one that has significantly underperformed Airgas stock over an extended period of time.
While we agree that the benefits of a letter writing campaign between our two companies have been exhausted, we strongly disagree with many of the assertions in your December 17th letter. In particular, we believe that a combination of our two companies could destroy rather than create value; that you underestimate the seriousness of your advisors’ conflicts; and that your characterization of my one conversation with you is inaccurate and misleading.
Air Products’ proposal grossly undervalues Airgas and its prospects for continued growth and shareholder value creation. Accordingly, our Board of Directors is not interested in pursuing your company’s proposal.
Sincerely yours,
/s/ Peter McCausland
Chairman and CEO
BofA Merrill Lynch and Goldman, Sachs & Co. are serving as financial advisors, and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Airgas.View more Full story: www.airgas.com Global Systems Forms New Group February 4, 2010 – Global Systems, LLC (dba The Global Group) has announced the formation of their newest group company, Global Calibration Gases, LLC, at their Palmetto, FL headquarters.
From their newly opened specialty gas fill plant and laboratory, Global Calibration Gases is a premier, high-end supplier of calibration gases and custom specialty gas mixtures. The industries served include chemicals and pharmaceuticals, petrochemicals, natural gas, and petroleum refineries, medical gas filling operations and research labs, and air quality monitoring. The Company specializes in multi-component hydrocarbon, BTU, and BTEX mixtures, low ppm and ppb volatile organic compound mixtures, and a complete line of EPA Protocol gases and NIST Traceable gas mixtures. Their analytical lab is in the process of attaining ISO 17025 accreditation.View more Full story: www.globalcalibrationgases.com Air Liquide Continues Acquisitions in Homecare February 1, 2010 – Air Liquide has just completed the acquisition of DinnoSanté, a company that specializes in medical-technical services for diabetes. DinnoSanté is a French company with 90 employees specializing in the equipment and home monitoring of patients with diabetes. It supplies nearly 2,300 chronic diabetes patients with equipment designed to facilitate their lives, including insulin pumps and glucose meters, and supporting them with personalized training and regular follow-up.
Pascal Vinet, Vice President, Healthcare World Business Line and Healthcare Operations, Air Liquide Group, commented, “This new Healthcare acquisition illustrates our development strategy, which seeks to strengthen our global range of services related to homecare treatments. Health is a solid and promising growth driver for the Air Liquide Group.”View more Full story: www.airliquide.com American Air Liquide Rushes Medical Oxygen to Haiti January 29, 2010 – American Air Liquide, a division of industrial gas company Air Liquide, has been helping coordinate emergency assistance efforts with the United Nations’ Center for International Disaster to provide much needed medical oxygen to the rescue teams.
Because of Air Liquide’s footprint and logistics structure, it was able to establish its first medical oxygen filling system on January 16 and a second system on January 18. In Haiti, Air Liquide is providing medical oxygen needs for a number of hospitals in the area and all of the temporary medical facilities/tents that are in operation at the U.N. compound.
The U.N. Medical Team had an immediate need for 20-25 cylinders per day at Level 2 hospitals and Air Liquide has configured two oxygen tube trailers for cylinder filling. Each tube trailer has a capacity to fill 400 size 44 (6m3) cylinders per day and Air Liquide technicians have been assigned to operate them.
While support services are needed, monetary donations are also critical to recovery efforts. Air Liquide has coordinated with the American Red Cross to develop a microsite for employee donations, which will be matched dollar for dollar by the company until February 28.View more Full story: www.us.airliquide.com Airgas Reports Fiscal 2010 Q3 Earnings January 28, 2010 – Airgas, Inc., the largest US distributor of industrial, medical, and specialty gases and related supplies, reported net earnings of $46.9 million, or $0.56 per diluted share, for its third quarter ended December 31, 2009. Excluding previously announced charges of $0.05 per diluted share for debt extinguishment and $0.04 per diluted share for withdrawal from multi-employer pension plans, adjusted earnings per diluted share were $0.65, compared to $0.76 per diluted share in the prior-year quarter.
Third quarter sales were $942 million, a decline of 13 percent from the prior year. Total same-store sales declined 14 percent, with hardgoods down 19 percent and gas and rent down 11 percent. Acquisitions contributed 1 percent sales growth in the quarter. On a sequential basis, total sales declined by 2 percent from the second quarter, reflecting the impact of fewer selling days and a normal seasonal decline of certain businesses in the All Other Operations segment. Sales per selling day increased sequentially by 1 percent.
Year-to-date free cash flow through the third quarter was a record $289 million compared to $171 million last year, driven by adjusted cash from operations of $470 million, up from $436 million last year, and by a 32 percent reduction in capital expenditures to $192 million this year.
The full report can be found at the Company's website.View more Full story: www.airgas.com Praxair Starts Up New Plant in Costa Rica January 26, 2010 – Praxair, Inc. has started up its new air separation plant in San Jose, Costa Rica. In addition to meeting increasing demand for oxygen, nitrogen, and argon from industrial and medical customers in Costa Rica, the new facility positions Praxair to supply distributors in Panama as well as the Caribbean market.
Praxair is the leading industrial gases company in Costa Rica, supplying oxygen, nitrogen, argon, and carbon dioxide to a variety of industrial and medical customers. It also operates a carbon dioxide plant and an acetylene and packaged gases facility in the country.View more Full story: www.praxair.com Air Products Reports Fiscal Q1 EPS January 26, 2010 – Air Products has reported net income of $252 million, or diluted earnings per share (EPS) of $1.16, for its fiscal first quarter ended December 31, 2009 versus $69 million and $0.32 for the fiscal first quarter of 2009.
First quarter revenues of $2,174 million declined one percent as lower energy and raw material cost pass-throughs offset higher volumes and favorable currency. Operating income of $345 million was up 20 percent from the prior year on improved volumes in Tonnage Gases, and Electronics and Performance Materials; broad productivity gains across the company; and favorable currency impacts. Sequentially, sales improved two percent while operating income gained five percent.
John McGlade, Chairman, President and Chief Executive Officer, said, “We are off to a good start in fiscal 2010. Our earnings per share grew 20 percent and we continued our margin improvement putting us on track to meet our 17 percent goal in 2011. Both our sequential and year-over-year results benefited from an improving global economy and our efforts to move Air Products to a sustainable, lower cost structure.”View more Full story: www.airproducts.com Ballard to Advance Fuel Cell Power Module Technology January 22, 2010 – Ballard Power Systems has been awarded up to $4.8 million by Sustainable Development Technology Canada (SDTC) for a project to further develop fuel cell power module technology for the transit bus market. Design improvements will be implemented on test buses to be operated in Metro Vancouver, beginning in the fourth quarter of 2010.
“Heavy duty diesel vehicles account for almost half of Canada’s road transportation greenhouse gas emissions,” said Vicky Sharpe, President and CEO of SDTC. “The technology developed by Ballard will increase the cost-effectiveness and performance of fuel cell hybrid buses, making them more accessible to public transit authorities and helping Canada to reduce its greenhouse gas emissions.”
In the development project funded by SDTC, Ballard and it’s system integration partner, ISE Corporation, will design, assemble, and test key sub-components for Ballard’s FCvelocity™-HD6 power module and the hybrid electric drive system. Refinement of this critical new technology will facilitate the commercial introduction of fuel cell hybrid buses by reducing cost, improving durability and robustness of select sub-systems, and improving overall bus performance.View more Full story: www.ballard.com Air Products Supplying Multiple LNG Heat Exchangers for Gorgon Project January 21, 2010 – Air Products has signed an agreement with Chevron Australia Pty Ltd. to supply its proprietary liquefied natural gas (LNG) process technology and equipment for three process trains producing up to 15 million tons of LNG per annum at the Gorgon Project located offshore of Western Australia. LNG production is scheduled to begin in 2014.
Under the agreement, Air Products will provide three separate units of its proprietary propane pre-cooled mixed refrigerant process using the SplitMR® machinery configuration. The LNG units will operate offshore Western Australia on Barrow Island.
Air Products’ involvement in LNG projects in Australia dates back to the late 1980s and early 90s when it delivered process technology and MCR® cryogenic heat exchangers for the first three trains at the North West Shelf Venture LNG Project.View more Full story: www.airproducts.com CryoVation to Host March GAWDA Regional Meeting January 19, 2010 –The oxygen challenges for a climb up Mount Everest – and the adventure itself - will be featured at the annual Southeastern zone regional meeting for the Gases and Welding Distributors Association (GAWDA) hosted by CryoVation March 2 at Raptor Bay Golf Club in Fort Myers, FL. This topic will be presented by Christopher Guest, a Distributor Sales Manager at Air Liquide who scaled Mount Everest last May and whose mountain adventures have been featured in CryoGas International.
Other speakers will be Jim Glessner, President of Trackabout, Inc., who will outline the step approach to business growth and talk about cylinder tracking; and Nick Covino, an instructor from the renowned David Leadbetter Golf Academy in Naples, who will discuss the mental aspects of the game and provide hands-on instruction. Along with these speakers, attendees will enjoy golf games, an 18-hole golf tournament, and an after-golf social and networking event. Manufacturers and distributors from states throughout the country are expected to attend. Lloyd Robinson, President of Awisco and President Elect of GAWDA, will open the 8:30 a.m. to 7 p.m. program.
The day before, on Monday March 1, CryoVation will host an open house at its Fort Myers headquarters, featuring equipment demonstrations.
Reservations for the event can be made by calling Ryan Boyd at CryoVation, (239) 337-1114.View more Full story: www.cryovation.com Linde and BASF Cooperate in Flue Gas CO2 Capture January 15, 2010 − Linde-KCA-Dresden GmbH (LKCA), a Linde Group subsidiary, and BASF signed a cooperation agreement to jointly market licenses and plants for the capture of carbon dioxide (CO2) from flue gases.
Within this cooperation BASF will be responsible for the chemical processes for capturing CO2, while LKCA will provide engineering and design as well as the construction of the facilities. The cooperation will focus mainly on the Middle East region, where the demand for purified CO2 is increasing, for example to raise yields in crude oil production (by means of enhanced oil recovery) and in urea production.
“In a situation where energy production around the world relies predominantly on fossil materials and where this share is expected to increase further, we will concentrate precisely on these energy sources in our cooperation,” said Dr. Andreas Northemann, head of the gas treatment business in BASF’s Intermediates division, and added: “By pooling the two companies’ expertise we can provide our customers with integrated engineering solutions and even complete CO2 capture plants.”
“Through this cooperation we will contribute to capturing and transporting climate-damaging CO2 in a controlled manner for recycling in purified form or final sequestration,” said LKCA Managing Director Jörg Linsenmaier.
LKCA has extensive expertise in the field of planning and building plants that separate and then compress CO2 from flue gases. BASF has experience in capturing CO2 from gas flows. The company markets its amine-based gas treatment technology under the brand name aMDEA®, which has been used successfully around the world in more than 220 gas scrubbing facilities, mainly in natural gas and syngas facilities.View more Full story: www.linde.com Praxair to Supply Industrial Gases to Valero in Memphis January 15, 2010 – Praxair, Inc. has finalized an agreement with Valero Refining Company to supply oxygen and nitrogen to Valero’s Memphis, TN, refinery connected to Praxair’s pipeline system. As part of the agreement, Praxair will build a new air separation plant with a capacity of 450 tons per day. In addition, Praxair will build two new six-mile pipelines for the supply of oxygen and nitrogen to Valero’s Memphis refinery.
“The Valero agreement confirms Praxair’s commitment to unmatched reliability and system capability for the economic future of the Memphis area,” said Ted Trumpp, Vice President, East Region, for Praxair’s North American Industrial Gases business unit.View more Full story: www.praxair.com |
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