Industrial Sector Ideas

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>>> Airgas merger shows how patience pays off



Nov 19, 2015

Phila Business Journal


http://www.bizjournals.com/philadelphia/news/2015/11/19/radnor-airgas-merger-air-liquide-mccausland.html?ana=yahoo




In 2010, Airgas Inc. was on the defensive and trying to fend off a hostile take over by Air Products & Chemicals Inc. located up the Northeast Extension in Allentown, Pa.

At the time, Air Products (NYSE: APD) offered to buy Airgas (NYSE:ARG) for $70 a share in cash in a $5.9 billion transaction. But the Airgas board wasn’t biting. It had concluded the $70 per share evaluation was clearly inadequate and the company was valued at least $78 a share.


Airgas is headquartered in Radnor, Pa.

Airgas, which rejected Air Products’ offers three times, also deployed a poison pill, and by February 2011, Air Products withdrew its bid.


How four short years can change things.

Air Liquide announced Tuesday a $13.4 billion deal to buy Airgas, a leading distributor of specialty gases and welding equipment, for $143 a share in cash. It’s a significant milestone for the Radnor, Pa., company and its founder.

Peter McCausland formed Airgas Inc. in 1982 as a single company and stands to reap nearly $1 billion from the sale. He grew Airgas from a small distributor of industrial gases to a billion-dollar heavyweight in the industrial gas distribution business.

McCausland started the company after he had looked at Connecticut Oxygen Corp. as a possible acquisition for a German industrial gas company for which he was working. When his boss said no, McCausland, then 32 years old, set out on his own to raise more than $5.3 million to buy the Connecticut Oxygen. By 1986, sales had grown to $25 million, thanks to acquisitions. That same year, the company merged with Werco, a private Wilmington, Del., concern twice the size of Airgas that made protective gear and steel cylinders.
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McClausland was committed to and saw the value in rolling up small and big competitors across the country that provided specialty gases and other equipment to companies. Through that strategy, Airgas has grown over the years through more than 300 acquisitions, which strengthened its national network by giving it a presence in several key areas where it lacked market share.


Sometimes the company’s rapid growth led to inefficiencies in operations, but it always worked through them – implementing restructuring programs and other maneuvers to keep things tight. For example, in March, the company saw its growth prospects hindered by the decline in oil prices and the strong dollar and a tough winter that hampered sales. Disappointed by organic sales growth, the company began to look for ways to improve business.

Airgas and Air Liquide have known and worked with each other for a long time. Over the last six months of so, the two companies were in discussions over several potential transactions and distribution agreements, according to a person familiar with the matter. More recently, those talks took a turn when an opportunity presented itself to combine as a way to create one of the largest gas companies. A deal was struck.
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“This transaction is compelling for our shareholders, arising from the persistent execution of our business strategy for more than three decades,” McClausland said in a statement when the deal was announced. “Airgas customers and employees will benefit from Air Liquide’s unrivaled 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.”

It’s the biggest industrial deal to be struck in nine years though there has been consolidation in the sector, according to Bloomberg. For example: Praxair Inc., Airgas’s largest domestic rival, bought two years ago NuCO2, which provides carbonation for beverages for restaurants, for $1.1 billion; Linde acquired in 2012 Lincare Holding Inc. for $4.4 billion; and Linde bought in 2006 BOC Group for $14.1 billion.

In 2012, McCausland relinquished his duties as president and chief executive officer of the company. This was at a time when the company was at a high point and reporting record earnings. McCausland continued to be involved with the company and served in the role of executive chairman of the board and is expected to remain involved in the combined companies.

For now, there are no immediate plans for Airgas’ Radnor headquarters, according to someone familiar with the situation. Airgas has housed its operations at Radnor Court at 259 N. Radnor Chester Road for years. The primary focus now is to integrate the two companies.

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