On Mar 30, 2016, we issued an updated research report on Airgas, Inc. ARG. The company is expected to benefit from its continuous focus on process improvements, operating efficiency initiatives, acquisitions and repurchases. However, there are potential risks associated with its merger with Air Liquide considering the size of the transaction.
On Nov 17, Airgas announced that it will be acquired by Air Liquide for $143 per share in cash, or a total enterprise value of $13.4 billion. The deal, which is subject to Airgas shareholders’ approval, receipt of necessary antitrust and other regulatory approvals, is touted to be the largest takeover in the industrial gases space in recent years. The transaction brings together Air Liquide, the world leader in gases, technologies and services for Industry and Health and Airgas, one of the leading suppliers of industrial gases in the U.S. The combined company will hold the number one position in North America, complementing Air Liquide’s number one positions in Europe, Africa/the Middle East and the Asia Pacific. However, the merger is subject to typical risks associated with capital availability to finance such a large transaction as well as integration risks.
For now, Airgas remains focused on leveraging its infrastructure, managing expenses, expanding its telesales business, enhancing the e-business platform and developing the regional management structure to increase sales growth. Airgas continues to work on a number of process improvements and operating efficiency initiatives to further leverage its industry-leading platform, expand operating margins and enhance customer service offering. The company continues to look for opportunities to reduce expenses without sacrificing on customer service.
Notably, since the beginning of fiscal 2015, Airgas has acquired 17 businesses that generate aggregate annual sales of approximately $84 million. The company stated that the acquisition pipeline remains solid and on track to achieve its goal of acquiring $100 million in sales during the year.
On the flip side, Airgas’ results continue to bear the brunt of a challenging industrial economy as evident from the decline in sales to energy and chemical customers and manufacturing and metal fabrication end markets. Moreover, the helium market has contracted, with numerous customers switching to alternatives, increasing conservation efforts, or deciding to no longer use the product. A large number of Airgas’ industrial customers have gone on a significant conservation mode that may hurt its performance.
Airgas currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks include Arkema S.A. ARKAY, Sinopec Shanghai Petrochemical Co. Ltd. SHI and OCI Partners LP OCIP. While Arkema S.A. sports a Zacks Rank #1 (Strong Buy), Sinopec Shanghai Petrochemical and OCI Partners hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment