Air Liquide, Airgas deal to create gas giant

Source: ICIS News

2015/11/17

If finalised, the acquisition will create the world’s largest industrial gas company by sales and put Air Liquide in the No 1 position in the US. (ddp USA/REX Shutterstock)
If finalised, the acquisition will create the world’s largest industrial gas company by sales and put Air Liquide in the No 1 position in the US. (ddp USA/REX Shutterstock)

Air Liquide CEO Benoit Potier says the purchase “offers continuous growth opportunities” for the industrial gas giant. (DURAND FLORENCE/SIPA/REX Shutterstock)HOUSTON (ICIS)--Air Liquide's $13.4bn bid to acquire Airgas, announced on Tuesday, would create the world's largest gas company in terms of revenue.

Paris-based Air Liquide's gas and services business reported 2014 sales of €13.9bn ($14.8bn), while US-based Airgas reported sales of $5.31bn for its fiscal 2015, which ended on 31 March. Combining the two brings the total to $20.1bn.

That will put the combined company above Germany-based Linde, the world's largest in terms of sales. The three geographic regions of Linde's gas division reported combined 2014 sales of €14.1bn ($15.0bn).

The acquisition will also put Air Liquide on top of the Americas in terms of sales. In 2014, it ranked the smallest among the five biggest players, which include Airgas, Praxair, Air Products and Linde.

Air Liquide earned $3.63bn in the US and the rest of the Americas in 2014. Nearly all of Airgas's 2014 sales were generated in the US. Combined, the two companies had sales of $8.94bn just in the Americas.

That total beats Praxair, which led in the Americas with 2014 sales of $8.43bn.

The US is the world's largest market for industrial gas, another reason why the deal is attractive to Air Liquide. The nation's refineries, methanol plants and ammonia plants all need hydrogen gas and carbon monoxide, which industrial gas companies are supplying through methane reformers.

However, Air Liquide is not just expanding its foothold in the Americas with its purchase of Airgas. While Air Liquide is a significant producer of industrial gases, Airgas is mainly a distributor. An acquisition would complement each of their strengths.

Air Liquide owns more than 140 industrial gas plants in the US. By contrast, Airgas owns just 16 air separation units, making it the smallest US producer among the five major gas firms.

Instead, the bulk of Airgas's assets are made up of branches, retail stores, gas-fill plants, specialty gas labs and distribution centres. These exceed 1,100. In fact, Airgas's distribution segment accounted for about 90% of its sales in 2014.

Both Airgas and Air Liquide pointed to the complementary nature of the acquisition as being one of the deal's strengths.

Airgas's footprint in the US could speed up the spread of Air Liquide's technologies in the country, the companies said. As it stands, Airgas has more than 1m customers in the US.

If Air Liquide closes on the acquisition, it expects to achieve more than $300m in pre-tax cost, efficiency and volume synergies, most of which will be realised within three years, it said.

Moreover, the company intends to maintain its A-/A credit rating from Standard & Poor's Ratings Services (S&P).

The deal has already been approved by each of the company's boards of directors. The acquisition still needs to receive approval from regulators and Airgas shareholders.

The companies did not say when the deal could close.

“This combination offers significant benefits for all of our stakeholders due to the highly complementary nature of the two businesses," said Benoit Potier, Air Liquide CEO. "This acquisition increases our geographic reach in the resilient US market, and offers continuous growth opportunities. Airgas is the industry leader in US packaged gases with a customer-centric organisation and we are confident in our ability to successfully combine operations.

Airgas CEO Peter McCausland said, "Air Liquide’s long-term vision and strong heritage in the US make it the right fit for our valued customers, and the combination creates significant opportunities for the talented employees of both companies."

He added: "Airgas customers and employees will benefit from Air Liquide’s unrivalled global footprint and strength in technology, innovation and operational efficiency, while Airgas is ready to bring the entrepreneurial culture and packaged gas excellence that have driven our success to date."

Air Liquide's bid follows one made more than five years ago by Air Products. Initially, Air Products offered to acquire Airgas for $60/share or $5.1bn in cash.

Ultimately, Air Products raised its offer to $70/share, or $5.9bn, before giving up the following year.

($1 = €0.94)

INSET IMAGE: Air Liquide CEO Benoit Potier says the purchase “offers continuous growth opportunities” for the industrial gas giant. (DURAND FLORENCE/SIPA/REX Shutterstock)