Photographer: Fabrice Dimier/Bloomberg

France's Air Liquide Rides Revolutionary Replica to Conquer U.S.

  • Deal to buy Airgas began at Philadelphia gala celebration
  • A `bold step' by Air Liquide to boost earnings, JPMorgan says

Over the past century, Air Liquide SA has grown from a startup in a bus garage to the top global producer of industrial gases such as oxygen, nitrogen, hydrogen and carbon dioxide, with No. 1 or No. 2 positions in Europe, Africa, and Asia. In North America, though, the French company was stuck in third place.

On Tuesday, Chief Executive Officer Benoit Potier announced a deal that will seal Air Liquide’s dominance: A $10.3 billion takeover of Airgas Inc., the top U.S. supplier in its industrial market specialty.

Benoit Potier speaks Nov. 18

Photographer: Eric Piermont/AFP via Getty Images

“We will clearly become an undisputed global leader,” Potier said Wednesday in Paris. “This is definitely a game-changing acquisition.”

Air Liquide delivers gases to industrial sites ranging from refineries to soda bottling plants. In the space industry, it provides propulsion for launchers and liquid nitrogen to freeze foods to keep bacteria and mold at bay. For consumers, it sells scuba gear for divers and home oxygen units to sufferers of lung diseases.

“Air Liquide is taking a bold step to boost its earnings’ profile by buying a business about a quarter of its size,” JPMorgan Cazenove analyst Martin Evans wrote in a note on the deal. Benefits could come from cost savings.

French Wines

The two companies had meetings over the past two years about various commercial ventures but only started discussing a merger this year, Airgas Chairman Peter McCausland said in an interview Wednesday. According to Air Liquide’s Potier, his company’s first significant move on Airgas came in June when Pierre Dufour, a senior executive vice president, met McCausland in Philadelphia, where they were present to greet L’Hermione, a replica of the tall ship that brought the Marquis de Lafayette to aid George Washington during the American Revolution in 1780.

McCausland, also the founder of Airgas, had been part of the re-enactment of the transatlantic voyage as a sponsor of “La Grande Fete,” a gala with French wines and food to celebrate the ship’s docking.

Potier said the two sides came together because McCausland, 65, had wanted to move on from the company he had built via more than 400 acquisitions. McCausland, whose Airgas shares and stock options are valued at about $962 million in Air Liquide’s all-cash offer, said he will stay on at the merged company to help with the integration.

National Mourning

“I want this to be a great deal for Air Liquide and that will be a validation of how good of a company we really are,” he said. “The cultures of these two companies are very, very similar. They have a no-nonsense approach to business and they move very quickly.”

Over the past four months, teams representing the companies met in New York and at Airgas headquarters just outside Philadelphia, according to a person familiar with the process who asked not to be named discussing private deliberations. The initial conversations spurred detailed negotiations that the two sides codenamed “Sangria.”

About the time the two sides were finalizing the agreement last Friday, terrorists struck Air Liquide’s home city of Paris. The companies decided to hold off announcing the deal until after France’s period of national mourning, which ended Monday, the person said. An Air Liquide spokeswoman declined to comment on these details.

Jacques Cousteau

Air Liquide, a member of the CAC-40 index of France’s biggest companies, was founded in 1902 by two young French science graduates who worked in a Paris bus garage to develop a way to chill and compress air until it turned into a liquid and could be separated into constituent components such as oxygen, nitrogen and argon. That opened the way to a host of industrial applications -- and attracted capital and customers as far off as Japan and the U.S.

After World War II, the fast-growing company worked with marine explorer Jacques Cousteau to develop the first self-contained underwater breathing apparatus. That spurred the creation of Aqua Lung, a subsidiary that the company says is the top global supplier of diving equipment. In the 1960s, Air Liquide partnered with France’s space program to fuel its Ariane rockets that blast off from French Guiana.

By buying Airgas, which gets 98 percent of its revenue from the U.S., Air Liquide will jump by its own estimates to the top spot in North America. Ranking of gas companies depends on geographic breakdown and product markets. Unlike in Europe, suffering from slow economic growth and lackluster industrial production, Potier said Air Liquide can ride the wave of growth in construction and manufacturing in the U.S. fueled by cheaper energy costs.

The U.S. “is the fastest-growing market among advanced economies,” Potier said. “It’s the largest industrial gas market worldwide.”

Barclays Plc and BNP Paribas SA are Air Liquide’s financial advisers on the deal and are also underwriting the bridge financing. Cleary Gottlieb Steen & Hamilton LLP and Bredin Prat are the French company’s legal advisers. Goldman Sachs Group Inc. and Bank of America Merrill Lynch are financial advisers for Airgas and Wachtell, Lipton, Rosen & Katz is the company’s legal adviser.

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