Air Products & Chemicals Inc., the world’s largest hydrogen producer, agreed to buy 67 percent of Chile’s Indura SA for 351 billion Chilean pesos ($707 million) to gain sales of industrial gases and welding equipment in Latin America.
The transaction also includes assumption of 100 billion pesos of Indura’s debt, Air Products said today in a presentation, increasing the value to $908.5 million. The deal is expected to close by early July and will add to Air Products’ earnings in the fiscal year starting in September, the Allentown, Pennsylvania-based company said in a statement.
The deal would be Air Products’ largest, according to data compiled by Bloomberg, and would make it the second-biggest provider of industrial gases in Latin America with $1.5 billion of annual sales, the company said. The acquisition follows a failed $5.9 billion hostile bid for U.S. gas distributor Airgas Inc. that ended in February 2011.
“Indura expands our geographic presence and adds additional growth opportunities, helping balance our global portfolio,” Chief Executive Officer John McGlade said on a conference call. “Latin America is the next-highest growth region in the world after Asia.”
Indura, currently controlled by the Briones family, is the largest independent industrial-gas company in Latin America, with 62 percent of sales in Chile, McGlade said. The Santiago-based company has annual sales of $478 million, more than 20 production sites and in excess of 2,300 employees. It also has more than 100 retail outlets in Argentina, Chile, Colombia, Ecuador and Peru, Air Products said.
The equity purchase will be made in two phases, and the Briones family has a put option for the remaining interest in the company it founded, Chief Financial Officer Paul Huck said on the call.
About 85 percent of Indura sales are packaged gases, such as oxygen and acetylene, sold in small metal cylinders, and the remainder are bulk sales to industries such as steel and glass, Huck. About 65 percent of the packaged-gas sales are related to welding.
Air Products plans to expand bulk sales with growth in Latin American manufacturing, McGlade said.
Cost savings from the transaction will be about $20 million a year, Huck said. The deal will be financed with a 3-month bridge loan to facilitate the purchase in pesos, followed by long-term financing, he said.
Air Products had $237 million in Latin American sales, excluding joint ventures, or 2.4 percent of total revenue, in its 2011 fiscal year, according to data compiled by Bloomberg.
The shares rose 2.5 percent to $81.58 at the close in New York, the highest since May 15.