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Sensational news from the US, where major industrial gases player Air Products is making the first moves in an attempt to acquire fellow gas & equipment company Airgas Inc.

We can report that Air Products has made an offer to acquire Airgas for $60.00 per share in cash – which represents a deal worth around $7bn in total.

Airgas has confirmed the approach with a resolute response of its own, however. In a statement released later today, the company confirmed receipt of the 'unsolicited proposal' and noted that its Board of Directors will 'review the proposal with its financial and legal advisors'.

The offer was made in a letter to Airgas’ Board of Directors yesterday, after it is believed the CEOs of the two companies had previously discussed Air Products’s interest in acquiring the Radnor, Pennsylvania-based gases distributor.

Air Products had previously submitted two written offers to Airgas, which were both rejected, along with the former’s request to discuss these further.

At $60.00 per share, the offer provides a 38% premium to Airgas shareholders based on yesterday’s closing price of $43.53 and is 18% above Airgas’ 52-week high. The total value of the transaction is approximately $7bn, including $5.1bn of equity and $1.9bn of assumed debt.

The acquisition is expected to be immediately accretive to Air Products’ earnings per share on both a GAAP and cash basis, excluding expected one-time costs.

If successful, the deal would represent a huge shift in the industrial gas landscape in North America.

Interesting development
Spiritus Consulting is widely perceived as the leading provider of knowledge management and consulting services to the industrial gases business, and sees the proposed transaction as an ‘interesting deal’.

John Raquet, Managing Director of Spiritus Consulting, told gasworld, “This is an interesting development. If successful, Air Products would become a fully integrated gas company in the US for the first time since it sold its cylinder business to Airgas in 2002.”

“This would bring a large customer base to Air Products; Airgas has a $4bn business, mainly at the cylinder end of the business.”

“I would expect some asset sales to meet anti-trust possibilities, but as Air Products is not greatly involved in the cylinder business, it perhaps won’t be such a problem,” he added.

Fully integrated indeed. Figures from Spiritus suggest that Airgas operates with North American packaged gas sales of just over $1.7bn – the deal would be a huge coup for Air Products. Adding this number to the Air Products enterprise, the combined entity would be flexing considerable muscle in the market – anti-trust issues aside.

Stalemate
However, there’s no guarantee that the proposed deal will go ahead at all. Air Products remains determined, yet Airgas has confirmed the approach with a resolute response of its own.

In a statement issued later the same day, Airgas confirmed receipt of the ‘unsolicited proposal’ and noted that it’s Board of Directors ‘will review the proposal with its financial and legal advisors’.

‘Airgas shareholders,’ the statement continued, ‘are advised to take no action at this time’.

The company acknowledged Air Products’ previous two offers, which ‘after consultation with its financial and legal advisors’ Airgas unanimously determined 'were not in the best interests of Airgas or its shareholders, as they grossly undervalued Airgas’.

The company has also circulated a letter of response to those previous offers, sent to Air Products earlier this year, in which Chairman and CEO Peter McCausland politely outlines the reasons for its steadfast refusal so far.

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