Linde AG (LIN), the world’s second-biggest supplier of industrial gases, agreed to buy a European business from Air Products & Chemicals Inc. (APD) for 590 million euros ($751 million) to expand its health-care operations.
The home care business, which supplies domestic patients with oxygen, generates 210 million euros in annual sales from sites in Belgium, France, Germany, Portugal and Spain, the Munich-based company said in a statement. Linde will almost double sales from this product area, making the German company among Europe’s top suppliers of home care respiratory products.
Linde plans to use the home care division as a springboard to reach an additional 260,000 patients receiving care outside of hospitals. The company is paying 2.81 times sales, based on the enterprise value. That compares with a median of 2.72 times sales for European industrial gas deals in the last 10 years, according to data compiled by Bloomberg.
“I’m a bit surprised by the multiple,” said Thorsten Strauss, an analyst at NordLB in Hanover, with a “hold” recommendation on Linde. “It’s hard to expand in industrial gases, so this is clearly a strategic price.”
For Air Products, based in Lehigh Valley, Pennsylvania, the transaction highlights a strategic reassessment of home care assets in the U.K., Ireland, Argentina and Brazil. “Several options” for these assets are being assessed, it said. The company has been divesting units to focus on more profitable products.
“Health care is one of our three strategic growth pillars,” Chief Executive Officer Wolfgang Reitzle said in the statement. “It has proven to be a stable business and builds on the mega-trend of changing demographics.”
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