Air Products & Chemicals’ (APD) gain is Rockwood Holdings’ (ROC) loss after Air Products hired away Rockwood’s CEO Seifi Ghasemi to run the chemical company.
REUTERS Oppenheimer’s Edward Yang and Luis Amadeo explain why poaching Ghasemi from Rockwood is good news for Air Products & Chemicals:
Mr. Ghasemi led Rockwood Holdings through its divestiture of seven “non-strategic” businesses (Advanced Ceramics, Clay Additives, TiO2 and four other) for a total enterprise value of ~$3.9B. While his experience in industrial gases was the key consideration, his hiring could signal that Air Products & Chemicals may be open to divestitures, which have been anticipated by activist investors.
Although Air Products & Chemicals has not expressed intentions to divest any of its businesses, investors have periodically questioned whether or not Air Products & Chemicals should sell its volatile Electronics business (~17% of sales), which is more cyclical than its core industrial gases business.
As a reminder, Air Products & Chemicals was in the low $90s when activist Bill Ackman told investors in July 2013 that he had taken a major position in a large-cap, investment-grade US corporation. Since then Air Products & Chemicals has closed its valuation gap with Praxair (PX), although restructuring has been limited so far.
The one problem: Air Products & Chemicals valuation. “[Air Products & Chemicals] has generally been at a discount to [Praxair] in the last five years due to its mix and more volatile performance, but closed the gap last year on activist involvement and potential restructuring,” Yang and Amadeo note. Air Products & Chemicals trades at 21 times 2015 earnings, in line with Airgas’s (ARG) P/E ratio of 21.5 but well above Praxair’s 18.5 times.
Top Airline Companies To Buy Right Now
Shares of Air Products & Chemicals have jumped 6.8% to $129.97 at 12:03 p.m. today, while Rockwood Holdings has dropped 2.9% to $73.71, Praxair has risen 0.4% to $131.411 and Airgas has advanced 1.6% to $108.86.
No comments:
Post a Comment