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Business

Air Products To Spin Off Materials Technologies Business

Move will separate venerable firm into separate industrial gases and chemical companies

by Melody M. Bomgardner
September 17, 2015 | APPEARED IN VOLUME 93, ISSUE 37

Ghasemi
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Credit: Air Products
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Credit: Air Products

Air Products & Chemicals will separate its chemical business, which it calls materials technologies, in a tax-free spin-off to shareholders. The plan doesn’t come as a surprise; since coming aboard last year, chief executive officer Seifi Ghasemi has been promising to focus on Air Products’ core business of industrial gases.

The materials business will launch within a year with six divisions, including epoxy curing agents and electronic materials for the semiconductor industry. “It will be one of the premier specialized companies in the world,” Ghasemi said.

The materials business had sales of $2.2 billion in the 12 months leading up to June 30; Air Products’ gas sales were almost $8 billion. For the past year, according to Ghasemi, Executive Vice President Guillermo Novo has operated the materials business as if it were already independent. Novo will be the new company’s CEO.

Ghasemi, who previously led Rockwood Holdings, was hired by the board of Air Products in August 2014 after activist investor William A. Ackman took a 9.8% stake in the company. Activists have been pressuring diversified chemical firms to split up to maximize shareholder value. The biggest example of such a move was DuPont’s spin-off of Chemours, its performance chemicals business, in July.

Compared with industrial gases, Air Products’ materials business requires more spending on innovation but has less need for capital investment. It has been bogged down by the bureaucracy of the larger firm, which absorbed its cash flow and treated it like a “stepchild,” Ghasemi told analysts in a conference call.

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Comments
Robert Buntrock (October 7, 2015 9:30 AM)
Interesting analogy that chemicals (aka materials) have been treated as a "stepchild" at APCI. Since the new management is financially oriented rather than techie, I wonder if chemicals/materials will become a poor orphan instead.

I was a lab chemist at APCI in the late '60s and at that time the company, originally founded to produce equipment to liquefy gases, had morphed into a company with 75% of revenues from the sale of gases, 15% from liquefaction plants and equipment, and 10% from chemicals. The chemical sector was growing although investment was cut back in some areas including mine. Per C&EN reports, I believe the chemical sector has become larger and the overall company seems quite successful. It remains to be seen if the spinoff will be as successful since, as a techie, I don't always trust the financial "wizards" or MBAs.

Disclaimer: I had to sell my APCI savings plan stock when I left and have not invested in it since.
Melody Bomgardner (October 12, 2015 11:36 AM)
Dear Robert,
My understanding - like yours - is that the chemicals business at Air Products was a successful one, and there was some question of whether Ghasemi would indeed separate the business in order to streamline AP to focus on industrial gases. We'll have to wait and see if the chemicals firm will do well (and be more innovative) as a stand-alone firm, or if it will be acquired by another chemical player or private equity firm.

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