Air Products watching for complementary buys; industrial gases in focus
Air Products (NYSE:APD) the Allentown, Pennsylvania-based industrial gases company, has the balance sheet strength to pursue acquisitions for its core industrial gases operations, according to executives.
On Thursday’s 4Q16 earnings call, CEO Seifi Ghasemi noted the company announced in September 2015 its plans to spin off its Material Technologies business by end fiscal 2016 and that the unit, now named Versum Materials, had been a listed standalone company since 1 October. Ghasemi added that Air Products was progressing with the sale of its performance and additive materials business, which was expected to close by calendar year end.
Later in his prepared remarks, the CEO said with its restructuring complete, Air Products would focus on profitable growth.
“We have the balance sheet capacity now to take advantage of the very exciting growth opportunities we see, including accretive and complementary acquisitions focused on our core Industrial Gases business,” Ghasemi added.
CFO Scott Crocco said in his prepared remarks that Air Products had USD 550m more cash and USD 425m less debt following the Versum spinoff.
In the Q&A session, Barclays analyst Duffy Fischer asked how Air Products planned to spend its cash pile in the next 18 months.
“Sitting on top of USD 3bn of cash is obviously not what we intend to do,” CEO Ghasemi replied. “We do have plans to deploy that cash properly, we are not in a hurry to do that, we are not going to do anything rash, but we feel very good about that.”
Later in the Q&A session, Citi's P.J. Juvekar asked if the company was interested in large M&A.
“I don't want to comment on what our competitors are doing, but we think pursuing big M&A among the four major industrial gas companies is a foolish idea and we are not going to pursue foolish ideas,” Ghasemi said. “We don't have any plans to participate, we'll sit back and if anything happens, there certainly will be a lot of pieces that comes out. We have a lot of cash that would be kind of Christmas for us if it happens.”
Air Products’ core Industrial Gases business provides atmospheric and process gases and related equipment to manufacturing markets, including refining and petrochemical, metals, electronics, and food and beverage. Air Products also supplies liquefied natural gas process technology and equipment. Its Performance Materials business serves the polyurethanes, cleaning and coatings, and adhesives industries.
The company has largely focused on disposals in the past few years, with its last notable acquisition in 2013.
Lazard acted as sole financial advisor with regard to the Versum separation. Skadden, Arps, Slate, Meagher & Flom acted as Air Products' lead counsel.
Air Products has a market capitalization of USD 28.9bn.