Air Products to make hostile bid for rival

The industrial gas company Air Products and Chemicals will today launch a hostile bid for its smaller rival, Airgas.  Air Products, the worldÔÇÖs largest hydrogen producer, is to offer $60 per share for Airgas, representing a 38 percent premium above ThursdayÔÇÖs closing share price of $43.53. Including the assumption of $2 billion of debt, the deal values Airgas at $7 billion.  A merger between the two companies would create the largest industrial gas maker in North America by revenue.  Allentown, Pennsylvania-based Air Products has annual sales of around $8.3 billion, and sells gases such as argon, hydrogen and oxygen for industrial and manufacturing uses. The company employs 18,900 workers and has a market capitalization about $16 billion.  Airgas, which is headquartered in Radnor, Pennsylvania, supplies retailers who deliver propane to hardware stores and oxygen to hospitals. It employs 14,000 and has a market capitalization of around $3.6 billion, on sales of about $3.8 billion.  The unsolicited bid is Air ProductsÔÇÖ third since John McGlade, the companyÔÇÖs CEO, met Peter McCausland, AirgasÔÇÖs chairman, on October 15 to discuss a possible deal.  At that time, Air Products offered the company $60 per share in stock and agreed to assume around $1.9 billion in Airgas debt. That offer was rejected, as was a $62-per-share offer in December, which like the first offer, also included the assumption of debt.  It is understood that the Airgas board unanimously rejected both offers, believing they undervalued the fast-growing company.  Since Air Products makes and supplies gas to large industrial and commercial customers, while Airgas delivers industrial and medical gases to smaller businesses. McGladeÔÇÖs argument is that the two companies businessesÔÇÖ complement one another.  Air Products has also identified $250 million in annual cost savings it could extract from synergies.  The two companies have struck a deal before, with Airgas acquiring Air ProductsÔÇÖ US packaged-gas division in 2002 for around $236 million.  Air Products has made a deliberately high offer for Airgas in order to discourage other potential bidders. These could include France's Air Liquide or Germany's Linde.  It is thought that Air Products may launch a tender offer directly to shareholders in the coming weeks if the Airgas board does not reach a merger agreement.