Air Products and Chemicals (APD) withdrew its $5.9 billion offer to acquire Airgas Inc. (ARG) after a Delaware Judge upheld Airgas’ poison pill defense. Air Products had taken the case to the Delaware court so that it would be allowed to buy the company for $70 per share.
According to management of Air Products, the Board of Directors of Airgas barred its shareholders from deciding whether they wanted to accept the all cash offer of $70.00. Subsequently, Air Products decided to withdraw the offer. Airgas, on the other hand, had a different take and felt that the price offered was not sufficient to compensate the shareholders.
The Air Products and Airgas battle continues from October 2009 when Air Products made an all-stock offer at an implied value of $60 per share to acquire Airgas. After being rejected, Air Products upped its offer to a cash and stock proposal with an implied value of $62 per share in December 2009.
However, once again in February 2010, Air Products came up with an unsolicited public offer of $60 per share in cash. Airgas’ board had relentlessly rejected all the offers on the premise that it highly undervalued the company and its future prospects, including its industry leading position in the packaged gas business, unrivaled platform and benefits expected from the substantial recent investments.
In December last year, Air Products increased its offer to $70 per share and called it the best and final offer. The board of Airgas rejected the offer again stating that the $70 per share offer was inadequate and that the value of Airgas should be at least $78.00 per share.
The acquisition would have helped Air Products venture into the North American gas market and strengthen its packaged gas business.
Air Products is the world’s largest supplier of hydrogen and helium, and has a leading position in the gases business. Airgas sells industrial and medical gases and provides gas equipment, welding products, tools, and safety gear. Both the companies are based in Pennsylvania.
In fiscal 2010, ended December 31, 2010, Air Products recorded earnings per share (EPS) of $1.35, which increased from $1.16 in the prior year quarter. Quarterly revenues rose 10% year over year to $2.4 million on higher volumes across all business segments due to new contract wins.
Air Products raised its 2011 EPS range to $5.55-$5.70 per share from $5.50-$5.70 per share. The company expects its 2Q11 EPS in the range of $1.36-$1.40 per share.
Our Take
Airgas would have created value for Air Products. However, we are encouraged by the company’s new contract wins across the industrial gas space in recent months, reflecting a robust growth momentum.
Currently Air Products has a short-term (1 to 3 months) Zacks #3 Rank and a long-term (6+ months) Neutral recommendation.
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AIRGAS INC (ARG): Free Stock Analysis Report
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