Air Liquide Net Debt Hits 19.9 Billion Euros After Airgas Deal

The Tip Desk · June 30, 2016 · 2 min read

The industrial gas company saw its net debt-to-equity ratio climb to 151% following the acquisition of Airgas.

Air Liquide reported net debt of 19,860 million euros at June 30, 2016, an increase of more than 12.6 billion euros compared to the end of 2015. The industrial gas maker attributed this shift primarily to the financing of its Airgas acquisition, which involved 10.7 billion US dollars for shares, the refinancing of 0.9 billion US dollars of Airgas debt, and the consolidation of 1.8 billion US dollars of non-refinanced Airgas debt.

This financing activity drove the net debt-to-equity ratio, adjusted for dividend seasonality, to 151% at the end of June 2016, up from 57% at the end of 2015. The company said this ratio is expected to drop to around 100% by the end of 2016. To manage the debt, the company issued a 300 million euro public bond due April 18, 2022, and a 3 billion euro public bond divided into five tranches with maturities ranging from 2018 to 2028.

Revenue for the first half of 2016 reached 8,295 million euros, a published increase of 2.2% over the first half of 2015. This figure includes 511 million euros in sales from Airgas consolidated starting May 23, 2016. Excluding the effects of energy and currency exchange, revenue rose 8.0%. The Gaz & Services segment reported revenue of 7,618 million euros, representing a published growth of 4.3%.

Operating performance showed mixed results across segments. The current operating income for the group was 1,382 million euros, a decrease of 1.9% compared to the first half of 2015. The operating margin fell by 70 basis points to 16.7%, which the company attributed to a low margin of 4.2% in Engineering & Construction and the integration of Airgas, which has a lower average margin than the group.

Regional performance within Gaz & Services varied. The Europe zone reported current operating income of 638 million euros, a decrease of 2.8%, though its operating margin rose 30 basis points to 19.8%. In contrast, the Americas zone saw current operating income reach 431 million euros, an increase of 13.1%.

To satisfy Federal Trade Commission conditions regarding the Airgas acquisition, the company announced an agreement on June 24, 2016, to sell certain US assets to Matheson Tri-Gas, Inc.. These assets include 18 air gas separation units across 16 sites, two nitrous oxide production units, four liquid carbon dioxide production units, and three Airgas welding gas points of sale in Alaska. The company also signed an agreement to sell two liquid carbon dioxide and dry ice units in Iowa.

Looking forward, the company plans further refinancing in September or October 2016 through a capital increase between 3 and 3.5 billion euros and a long-term US dollar bond issue between 4 and 5 billion US dollars.