HONEYWELL TO ACQUIRE AIR PRODUCTS' LIQUEFIED NATURAL GAS PROCESS TECHNOLOGY AND EQUIPMENT BUSINESS TO EXPAND ENERGY TRANSITION SOLUTIONS AND SERVICES
Honeywell (Nasdaq: HON) has announced an all-cash acquisition of Air Products' (NYSE: APD) liquefied natural gas (LNG) process technology and equipment business for $1.81 billion. The acquisition is projected to immediately enhance Honeywell's sales growth and segment margin, and be accretive to adjusted EPS in the first full year.
This strategic move aims to expand Honeywell's energy transition solutions, providing a comprehensive offering that includes natural gas pre-treatment and state-of-the-art liquefaction under the Honeywell Forge and Experion platforms. Meanwhile, Air Products will continue focusing on its core industrial gas business and clean hydrogen technology.
The deal will bring approximately 475 employees from Air Products to Honeywell, and includes a 390,000-square-foot manufacturing facility in Florida. Expected to close by the end of the year, the transaction aligns with Honeywell's strategy of high-return acquisitions in automation, aviation, and energy transition.
- The acquisition is expected to be immediately accretive to Honeywell's sales growth and segment margin.
- Projected to be accretive to adjusted EPS in the first full year of ownership.
- Enhances Honeywell's energy transition capabilities, offering a comprehensive solution for managing natural gas assets.
- Incorporates Air Products' LNG technology, boosting Honeywell's installed base and aftermarket services.
- Includes a 390,000-square-foot manufacturing facility in Florida, adding significant production capacity.
- The acquisition cost of $1.81 billion might exert financial strain on Honeywell.
Insights
Honeywell's acquisition of Air Products' LNG process technology and equipment business, valued at
From a strategic standpoint, this acquisition aligns with Honeywell's disciplined capital deployment strategy and focus on high-return investments. The integration of Air Products' LNG business is likely to create synergies, particularly in the areas of aftermarket services and digital automation through the Honeywell Forge platform, which could drive further revenue growth.
However, investors should be aware of the execution risks involved with integrating the new business, as well as potential regulatory hurdles that must be cleared before the transaction is finalized. Additionally, while the acquisition enhances Honeywell's energy transition portfolio, it also ties the company more closely to the volatile LNG market, which may introduce some earnings variability.
The acquisition of Air Products' LNG process technology and equipment business by Honeywell highlights a strategic expansion in the energy sector. LNG, seen as a lower-emission and affordable transition fuel, plays a important role in the global energy landscape. Honeywell's current strength in pre-treatment solutions for LNG customers will now be complemented by Air Products' comprehensive LNG process technology, including the in-house design and manufacturing of coil-wound heat exchangers (CWHEs).
The CWHE technology is significant due to its high throughput and reliable operations, both onshore and offshore. This acquisition positions Honeywell to offer an end-to-end LNG solution, which may appeal to customers seeking a one-stop-shop for energy transition solutions. Additionally, the expected doubling of the LNG market over the next two decades presents substantial growth opportunities.
Despite the growth potential, investors should consider the risks associated with market fluctuations in natural gas prices and the broader energy transition trends toward renewables, which could impact demand for LNG over the long term. Nevertheless, in the short to medium term, the acquisition reinforces Honeywell's footprint in a critical energy segment.
The strategic acquisition of Air Products' LNG process technology and equipment business by Honeywell is not only a financial maneuver but also a positioning move within the broader energy transition landscape. Honeywell is aiming to capitalize on the growing demand for LNG, driven by key end markets such as power and data centers. The transaction promises to enhance Honeywell's value proposition by offering a full-service solution that spans from natural gas pre-treatment to state-of-the-art liquefaction, integrated under their existing digital platforms, Honeywell Forge and Experion.
For investors, this move signifies Honeywell's commitment to expanding its capabilities in the energy sector and leveraging its existing technological platforms to deliver comprehensive solutions. The immediate accretive nature of the acquisition to the company’s financial metrics is a positive indicator of its potential impact. However, the competitive landscape in the LNG market and the pace of technological advancements in energy solutions will be important factors to monitor going forward.
This acquisition underscores Honeywell's strategic direction towards consolidating and expanding its energy transition solutions, which aligns with industry megatrends. By focusing on scalable and efficient energy practices, Honeywell is positioning itself as a significant player in the evolving energy market.
- Acquisition will build on Honeywell's energy transition capabilities by creating an end-to-end offering for customers worldwide
- The combination will create new opportunities for diversified growth and innovation in aftermarket services and software
- Transaction is expected to be immediately accretive to Honeywell's sales growth and segment margin while also accretive to adjusted EPS in the first full year of ownership
- Air Products to continue its focus on its industrial gas business and related technology and equipment and driving the energy transition through clean hydrogen at scale
As a result of the acquisition, Honeywell will be able to offer customers a comprehensive, top-tier solution for managing their energy transformation journey. The new holistic offering will encompass natural gas pre-treatment and state-of-the-art liquefaction, utilizing digital automation technologies unified under the Honeywell Forge and Experion platforms. This full-service solution will enable efficient, reliable and optimized management of natural gas assets, delivering unparalleled value and support.
Currently, Honeywell provides a pre-treatment solution serving LNG customers globally. Air Products' complementary LNG process technology and equipment business consists of a comprehensive portfolio, including in-house design and manufacturing of coil-wound heat exchangers (CWHE) and related equipment. CWHEs provide the highest throughput of natural gas in a single exchanger with a small footprint and robust, reliable and safe operations both onshore and offshore.
"While the world continues to build the renewables-based energy infrastructure of the future, natural gas is a critical lower-emission and affordable transition fuel that will help meet ever-increasing and dynamic global energy demands," said Vimal Kapur, Chairman and CEO of Honeywell.
"This highly complementary acquisition will further strengthen our energy transition portfolio, and Air Products' CWHE technology will immediately expand our installed base - creating new opportunities to compound growth in aftermarket services and digitalization through our Honeywell Forge platform," Kapur added.
"The decision to divest our LNG heat exchanger technology and equipment business reflects Air Products' continued focus on its two-pillar strategy -- to grow our core industrial gas business and related technology and equipment, and to be a first-mover delivering clean hydrogen at scale to decarbonize industrial and heavy-duty transportation sectors," said Air Products' Chairman, President and Chief Executive Officer Seifi Ghasemi. "The LNG business is a great business and at its strongest point in its decades-long history thanks to the outstanding work of our people, and they will be in good hands to advance as part of Honeywell's related portfolio of technologies."
The LNG market has quadrupled over the past 20 years and is expected to double over the next two decades, driven by demand in key end markets including power and data centers according to industry research.1
Ken West, President and CEO of Honeywell's Energy and Sustainability Solutions (ESS) segment, said, "The integration of this talented team and the acquired proprietary technologies will enable Honeywell UOP to bring a full spectrum of scalable solutions and services that help our global customers navigate the complex journey to more sustainable and efficient energy practices."
Air Products' LNG Business has approximately 475 employees with headquarters in
This is the fourth acquisition Honeywell has announced this year as part of its disciplined capital deployment strategy. The company is focused on high-return acquisitions that will drive future growth across its portfolio, which is aligned with the three compelling megatrends of automation, the future of aviation and energy transition.
This transaction, which is expected to be adjusted earnings per share accretive in the first full year of ownership is not subject to any financing conditions and is expected to close before the end of the calendar year, subject to customary closing conditions, including receipt of certain regulatory approvals.
Editor's Note: Link to Photo- A completed LNG heat exchanger manufactured at Air Products'
About Honeywell
Honeywell is an integrated operating company serving a broad range of industries and geographies around the world. Our business is aligned with three powerful megatrends – automation, the future of aviation and energy transition – underpinned by our Honeywell Accelerator operating system and Honeywell Forge IoT platform. As a trusted partner, we help organizations solve the world's toughest, most complex challenges, providing actionable solutions and innovations through our Aerospace Technologies, Industrial Automation, Building Automation and Energy and Sustainability Solutions business segments that help make the world smarter, safer and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom.
We describe many of the trends and other factors that drive our business and future results in this release. Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are those that address activities, events, or developments that management intends, expects, projects, believes, or anticipates will or may occur in the future. They are based on management's assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments, and other relevant factors, many of which are difficult to predict and outside of our control. They are not guarantees of future performance, and actual results, developments and business decisions may differ significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements, except as required by applicable securities law. Our forward-looking statements are also subject to material risks and uncertainties, including ongoing macroeconomic and geopolitical risks, such as lower GDP growth or recession, capital markets volatility, inflation, and certain regional conflicts, that can affect our performance in both the near- and long-term. In addition, no assurance can be given that any plan, initiative, projection, goal, commitment, expectation, or prospect set forth in this release can or will be achieved. These forward-looking statements should be considered in light of the information included in this release, our Form 10-K and other filings with the Securities and Exchange Commission. Any forward-looking plans described herein are not final and may be modified or abandoned at any time.
1 This release references certain non-GAAP measures, including:
- Segment margin, which is defined as segment profit divided by net sales; segment profit, on an overall Honeywell basis, is defined as operating income, excluding stock compensation expense, pension and other postretirement service costs, amortization of acquisition-related intangibles, certain acquisition-related costs, and repositioning and other charges.
- Adjusted earnings per share, which is defined as diluted earning per share adjusted to exclude pension mark-to-market expense, amortization of acquisition-related intangibles, certain acquisition-related costs, and other items as described in reconciliations provided when we disclose adjusted earnings per share; and
- EBITDA, which we define as earnings before tax, depreciation and amortization.
Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends.
Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of these non-GAAP financial measures are that they exclude significant expenses and income that are required by GAAP to be recognized in the consolidated financials statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures.
About Air Products
Air Products (NYSE: APD) is a world-leading industrial gases company in operation for over 80 years focused on serving energy, environmental, and emerging markets. The Company has two growth pillars driven by sustainability. Air Products' base business provides essential industrial gases, related equipment and applications expertise to customers in dozens of industries, including refining, chemicals, metals, electronics, manufacturing, and food. The Company also develops, engineers, builds, owns and operates some of the world's largest clean hydrogen projects supporting the transition to low- and zero-carbon energy in the heavy-duty transportation and industrial sectors. Additionally, Air Products is the world leader in the supply of liquefied natural gas process technology and equipment, and provides turbomachinery, membrane systems and cryogenic containers globally.
The Company had fiscal 2023 sales of
Cautionary Note Regarding Forward-Looking Statements
This release contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about the transaction that is the subject of this release and its expected impact and timing, and about the company's business outlook and investment opportunities. These forward-looking statements are based on management's expectations and assumptions as of the date of this release and are not guarantees of future performance. While forward-looking statements are made in good faith and based on assumptions, expectations and projections that management believes are reasonable based on currently available information, actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors, including the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and other factors disclosed in our filings with the Securities and Exchange Commission. Except as required by law, we disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in the assumptions, beliefs or expectations or any change in events, conditions or circumstances upon which any such forward-looking statements are based.
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