In a bid to capture the growing business opportunities in the East region, Airgas, Inc. (ARG) has announced a reorganization plan, under which, it will divide its East region into two separate regions namely, the Northeast region and the East region. The reorganization will be effective from September 1, 2012.
Airgas East region is the largest distribution region of Airgas. Following the split, its Northeast region spreads over upstate New York and New England while the East region covers the metropolitan New York City area, Long Island, New Jersey, the eastern half of Pennsylvania, Delaware, Maryland, Washington D.C., and northern Virginia.
With this move, Airgas will be able to meet the growing demand in these two regions. Moreover, it will enable the company to better serve the existing customers as well as potential customers in these regions. Earlier in 2011, Airgas had reorganized its businesses into four larger divisions from 12 geographic regions.
Airgas has also turned its focus to substantial investments in order to expand its gas business. Recently, it announced the acquisition of the assets and operations of six businesses engaged in industrial gas and equipment supplies.
These acquisitions are expected to augment the packaged gas and hardgoods distribution portfolio of Airgas. Further, the investments will give Airgas an opportunity to extend in the potential yet unexplored markets across the U.S. The company has made nearly 400 acquisitions in its history.
We believe that Airgas has been proactive in reorganizing its operations not only to seize the opportunities in the East region of the U.S. but also to counter the growing threats from its peers that tend to take away its potential customers.
However, Airgas may still be vulnerable to potential threats from the lower helium chain supply affecting its volumes moving ahead. Moreover, the company may fail to achieve its targets given the integration related risks.
Airgas retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.
AIRGAS INC (ARG): Free Stock Analysis Report
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