Sometimes saying no is the best way to make a boatload of money on Wall Street. After all, Airgas ARG +22.63% managed to double its share price four years by fending off a hostile takeover bid from competitor Air Products.
In late 2010 Air Products launched an all-cash takeover offer for Airgas that valued the company at $65 a share in a bid to consolidate the industrial and medical gas market. At the time, U.S. stocks were in the midst of a recovery from the Great Recession, but a dearth of corporate deals made the merger dance a closely-followed battle on Wall Street. Air Products wound up boosting its bid to $70 a share, but Airgas didn’t bite, instead enacting a so-called poison pill to block a potential hostile tender. The poison pill was then challenged by Air Products in a Delaware court, but judges sided with Airgas.
Ultimately Air Products pulled its cash offer, which reached $5.8 billion, in February 2011. To appease shareholders Wayne, Pennsylvania-based Airgas then committed to repurchasing $300 million worth of its stock and pursuing a standalone business plan. The move coincided with a recovery in the global economy, which helped Airgas steadily increase revenues and profits.
John McGlade, the CEO of Air Products who launched the Airgas bid, then began to struggle to grow the company’s earnings and by 2013 he decided to retire amid pressure from activist investor Bill Ackman of Pershing Square. Since McGlade’s ouster and the appointment of Seifi Ghasemi as CEO, Air Products has been a top performers in the industrial and chemicals sector, however, the entire industry’s fortunes have turned in recent months amid rising fears of slowing growth in China, and developed markets like the United States.
As industrial gas businesses tying to wrench out cost savings and increase their end market diversification, Airgas once again finds itself a target. This time, at far higher prices, Airgas is a willing seller.
On Tuesday, Airgas agreed to be acquired by French competitor Air Liquide for $143 a share, over 100% higher than the 2011 offer it fended off. The cash deal values Airgas at $13.4 billion when including its outstanding debt, and brings together two complementary businesses. Airgas is a leader in packaged gases, while Air Liquide is a leader in services. The deal will also bolster Air Liquide’s business in North America, an attractive end market relative to many countries in Western Europe.
The combined company will be the largest industrial gas firm in the world, a the merger is expected to generate over $300 million in pre-tax synergies within two-to-three years of a deal’s close. Barclays and BNP Paribas are acting as financial advisors to Air Liquide, and will raise bridge financing for the deal. The Paris-based company also intends to raise as much as EUR 4 billion to refinance some indebtedness. Goldman Sachs and Bank of America Merrill Lynch are advising Airgas.