Air Products optimistic on Airgas bid, but stresses price limit

22 July 2010 17:02  [Source: ICIS news]

HOUSTON (ICIS news)--Air Products expressed optimism regarding its takeover bid for Airgas but stressed that it had a price limit, a top executive with the US industrial gases firm said on Thursday.

“We do not need to do this deal, everyone should understand,” said chief financial officer Paul Huck. “We will not chase this price up.

“We will not get into a bidding war,” he added. Huck spoke on a fiscal third-quarter earnings conference call for Air Products.

Air Products said it was positioned well for a potential takeover of packaged gas firm Airgas, noting that it had made progress with US authorities for obtaining regulatory approval.

“We have analysed the regulatory issues closely and are negotiating a consent decree,” Huck said. “We expect to sign it in the next few weeks. The fundamentals of the consent are in line with expectations.”

As a result, Air Products said it was focussing on Airgas shareholders, asking them to vote for Air Products-nominated executives to the Airgas board at the company’s annual shareholder meeting, to be held no later than 17 September.

“We remain convinced of the strong strategic rationale and sound industrial logic that underpins this transaction,” Huck said.

“But despite a highly attractive offer and repeated attempts to engage the Airgas board in discussions, they have refused,” he added.

Air Products recently raised its offer to $63.50/share, compared with an initial offer of $60/share in February, but Airgas said on a Wednesday conference call that it was still undervalued by the revised bid.

Airgas said it believed that Air Products’ cost of acquisition under its $63.50/share proposal was effectively unchanged as Airgas had reduced its debts since December 2009.

“As a result, while the per-share amount that Air Products has offered is nominally higher, Air Products’ total cost to acquire Airgas - as measured in terms of enterprise value - remains the same at about $7.15bn [€5.5bn], despite Airgas’ strongly increasing earnings and enhanced prospects,” Airgas CEO Peter McCausland said.

Both companies posted sizeable year-over-year earnings increases in their most recent fiscal quarters, with Air Products reporting a 23% bump on Thursday and Airgas noting an 18% increase.

Air Products’ stock surged $2.79, or 4%, to $72.84/share in mid-morning Thursday trading on the New York Stock Exchange.

($1 = €0.78)

For more on Air Products visit ICIS company intelligence
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By: Ben DuBose
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