Airgas deal deflates Air Liquide share price

18th November 2015, Comments 0 comments

Shares in Air Liquide plummeted in Paris on Wednesday on concern that the French company may be paying too much for Airgas in its attempt to build the world's largest industrial gas company.

On Tuesday Air Liquide said it will acquire Airgas of the United States for $13.4 billion (12.6 billion euros) and merge both companies.

Air Liquide shares were down 7.20 percent in mid-afternoon trading at 114.75 euros, making the stock the Paris market's worst performer.

The market welcomed the logic of the move on the US company, but some said the price -- offering a 50-percent premium on Airgas's recent share price -- was "expensive".

The offer represents "a hefty scarcity premium that still lingers in the consolidated world of industrial gases," Bloomberg News quoted JPMorgan Cazenove analysts as saying.

Air Liquide is offering Airgas investors $143 per share. That is nearly 35 percent more than Airgas's closing price on Monday, and almost 51 percent more than the US company's stock price over the past month.

"There is likely to be some concerns expressed about the premium being offered which we believe has been pitched as a 'knockout price'," brokers Liberum said in a note.

"That said, we believe this is a very good strategic move by Air Liquide bringing it a leadership position in US cylinder gases for small-sized customers to complement its co-leadership position in the region with large onsite customers," the broker said, recommending Air Liquide shares as a 'buy' with a target price of 130 euros.

There was also talk that other bidders for Airgas could emerge, potentially forcing Air Liquide into a battle for the US company.

"We're waiting to see whether other global gas players may be looking at Airgas," Morgan Stanley said in a note.

It cautioned, however, that rival bids would have to come up with vastly better synergy benefits to justify a challenge to Air Liquide's high bid.

Air Liquide's CEO, Benoit Potier told a news conference the merger offer was friendly and had the full backing of Airgas founder and executive chairman Peter McCausland, who holds just under 10 percent in his company.

"But until we close, you can always imagine foreseen or unforeseen events happening," he said.

Finance director Fabienne Lecorvasier said the merger would be finalised some time in 2016. She said it was difficult to give a more precise timetable, because obtaining US regulatory approval "can take relatively long".

Air Liquide said the transaction would significantly enhance its position in the United States, the world's leading market for industrial gases.

"This will make the United States the top country for Air Liquide and Europe will drop to second place," Potier said.

The deal would also catapult Air Liquide past Linde AG of Germany as the industry's largest company by revenue.

"The Airgas acquisition is out of line with Air Liquide's stated usual acquisition policy," noted a Paris trader. "But it's still a major opportunity to reduce its European exposure."

The combined annual revenues of Air Liquide and Airgas are about $20.5 billion, compared to $18 billion for Linde.

Air Liquide said it would finance the acquisition with a mix of bridging loans, new shares and bond issues in both dollars and euros.

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© 2015 AFP

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