While the fertilizer industry has been transfixed with merger news for the past year, a merger battle has also been brewing in the industrial gas and ammonia market. Industrial gas and ammonia provider Airgas on Feb. 22 rejected an unsolicited tender offer from Air Products and Chemicals Inc. Earlier in the month, Air Products offered to buy all outstanding Airgas shares for $60.00 per share in cash. The deal is valued at $5.1 billion. The tender offer will expire at 12:00 midnight New York City time on April 9, 2010.
“The Airgas board of directors is unanimous in its belief that the Air Products offer significantly undervalues Airgas and fails to reflect the value of our industry leading position and future growth prospects,” said Airgas Chairman and CEO Peter McCausland. “Since our IPO in 1986, Airgas has employed a disciplined approach to steadily growing revenue, EBITDA and shareholder equity, and Airgas stock has achieved total shareholder return over that period of more than seven times the returns of the S&P 500 Index. The Airgas board strongly urges stockholders to reject Air Products’s offer and not tender their shares.”
Airgas said that for every year since 2000 its stock price has consistently outperformed Air Products, with the exception of 2009. Airgas says the Air Products offer is simply an opportunistic attempt to buy Airgas at a bargain price, exploiting a brief anomaly in the equity markets between the two companies.
Air Products says it is offering a 38 percent premium over Airgas’s closing price on Feb. 4 and an 18 percent premium over its 52-week high. It says the $60.00 offer far exceeds Airgas financial projections for 2012-2014. Air Products says the Airgas claim that its shares have outperformed Air Products is neither accurate nor relevant. Air Products says what is relevant is whether Airgas can raise more value on a standalone basis. Air Products says Airgas has lowered its 2010 guidance and missed recent quarterly guidance.
Airgas bought LaRoche Industries Inc.’s industrial ammonia business in 2005 (GM May 2, 2005). Airgas Specialty Products (ASP) was formed at the time and added process chemicals and enhanced refrigeration capabilities with its January 2007 acquisition of CFC Refimax. The company also bought Continental Nitrogen & Resources’s Rosemount, Minn., aqua ammonia business in 2007 (GM May 28, 2007). ASP is a leading supplier of ammonia products and services in the U.S. for nitrogen oxide abatement (DeNOx), metal finishing, water treatment, chemical processing, and refrigeration. Airgas has also been moving into the new diesel exhaust fluid (DEF) market.
Air Products exited nitrogen fertilizer production back in December 2005 (GM Jan. 2, 2006), when it closed down ammonium nitrate prills, AN solutions, and nitric acid plants in Pace, Fla. It still has active nitric acid capacity of approximately 175,000 st/y at Pasadena, Texas, according to the International Fertilizer Development Center’s North American Fertilizer Capacity 2009.
According to Airgas, Air Products CEO John McGlade first made an unsolicited verbal proposal to Airgas CEO McCausland on Oct. 15, 2009, at $60 per share on an all-stock basis. This was followed up with a letter on Nov. 20, 2009. On Dec. 17, 2009, the offer adjusted to $62 per share, half stock/half cash. On Feb. 4, 2010, it went back to $60 per share, but all cash.
Airgas has annual revenues of $4.3 billion, with 14,000 employees. Air Products has revenues of $8.3 billion and 18,900 employees in over 40 countries.