Air Products to Sell Chemical Divisions
By Bob Fernandez, The Philadelphia Inquirer
Mar. 23–Air Products & Chemical Inc. said yesterday that it would try to sell commodity chemical businesses that generate $1.25 billion a year in revenue and buy a modest surfaces business.
The Allentown company also announced a plan to repurchase $1.5 billion in company stock and increased its quarterly dividend 6 percent, or 2 cents a share, to 34 cents a share.
Air Products said the restructuring would allow it to concentrate on the energy, electronics, home-care and chemicals markets. After the changes, 90 percent of the company’s revenue will come from industrial gases and related equipment, such as building hydrogen plants, and the remaining 10 percent from chemicals.
The company said the high price of natural gas in the United States was a major factor in shedding a large part of its chemicals business. Natural gas is a raw material in the chemical business and has boosted costs across the industry.
"These actions will make Air Products a more focused, less cyclical and higher-growth company," John Jones, chairman and chief executive officer, said in a statement.
Jones said 60 percent of the company’s annual revenue would come from growth businesses after the restructuring, compared with 35 percent in 2000. In 2005, Air Products had revenue of $8.1 billion and a profit of $711.7 million, or $3.08 a share.
The company’s shares yesterday rose 1.2 percent, or 81 cents, to close at $67.66.
Bill Selesky, equity analyst with Argus Research, said that there were "a lot of moving parts" in the restructuring but that it appeared the changes could potentially lead to higher earnings.
"It takes some cyclicality out of the company’s earnings, and we like that," he said.
An Air Products executive cautioned analysts in a conference call that if the company could not obtain good prices for the chemicals businesses, it would not proceed with the sale.
The company is looking for buyers for its amines and polymers businesses, which have manufacturing plants mostly in the South and overseas. Air Products said it would sell a polyurethane intermediates plant in Louisiana to BASF Corp. for $115 million.
In its growth area, Air Products has signed an agreement to buy Tomah3 Products Inc. of Milton, Wis., for $115 million in cash. The business had $73 million in revenue in 2005 and makes products for the industrial cleaning, mining and oil industries.
The increased dividend is payable May 7 to shareholders on April 3. The company last raised its dividend — from 29 cents a share to 32 cents — in February 2005.
Contact staff writer Bob Fernandez at 215-854-5897 or bob.fernandez@phillynews.com.
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