Air Products & Chemicals Inc. (APD) continues to court Airgas Inc. (ARG) and has extended the expiration date of its tender offer of $70 per share for all of Airgas’ outstanding common shares. Air Products in the hope to garner more shareholder support for the takeover extended the expiration date from February 4, 2011 to February 15, 2011.
Air Products stated that out of Airgas’ 84.06 million shares outstanding, 7.1 million shares had been validly tendered and not withdrawn from the offer as of February 2, 2011.
In December last year, Airgas’ board of directors had again rejected Air Products’ final offer of $70 per share. The current offer values the deal at $5.9 billion excluding debt. The board had stated that the offer price was inadequate and below Airgas’ current value, which it estimated at no less than $78. Air Products had retaliated by standing firm on $70 per share as its “best and final offer”, which was at a 61% premium to Airgas’ closing price of $43.53 as of February 4, 2010, the day before it first announced an offer to acquire Airgas.
The Airgas-Air Product imbroglio began in October 2009 when Air Products made an all-stock proposal offer at an implied value of $60 per share. Since then Airgas’ board has continuously rejected all subsequent Air Products offers on the premise that they highly undervalue 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 fiscal 2010, ended March 31, 2010, Airgas recorded earnings per share (EPS) of 69 cents and revenues of $3.9 billion. In its recently reported third quarter fiscal 2011, Airgas delivered adjusted earnings per share of 80 cents, jumping 23% year over year. Total revenue in the quarter increased 9% year over year to $1,034.5 million. As of December 31, 2010, Airgas had total assets worth $4.85 billion with a cash position of $35 million.
For the fourth quarter fiscal 2011, Airgas expects EPS in the range of 82 cents to 86 cents, an estimated year-over-year growth of 19% to 25%. For full fiscal 2011, management projects EPS in the range of $3.28 to $3.32, depicting a growth of 22% to 24% over fiscal 2010. The company also stated that it is on track to beat its calendar 2012 earnings goal of at least $4.20 per share.
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 are based in Pennsylvania.
The Air Products and Airgas association would form the world’s largest industrial gas company. With the acquisition of Airgas, Air Products plans a foray into the North American packaged gas business.
We believe Airgas’ strong market position, growth opportunities, well-known brand identity, size and scale advantage, extensive U.S. distribution network, and product/service offering, diverse customer base and a multifaceted growth formula favor the company in the years ahead. We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock. Airgas competes with Air Products and L’Air Liquide SA.
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