DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON
TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. U.S. Disclosure:
Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
08 March 2010
Air Products and Chemicals,
Recap of Recent Time with APD Management
We were recently out on the road with APD’s CEO John McGlade and head
of IR Nelson Squires. In our time with management, we came away with a
number of takeaways (mostly tied to the pending hostile take-over of ARG)
■ Dilution—management is very focused on possible earnings dilution for
APD shareholders, which reduced our concern about the potential for
significant shareholder dilution.
■ Synergies—management indicated that there could be 10-20% upside to
their cost savings/synergy target of $250 million (not dramatically more) and
there could be modest revenue synergies as well. As a reminder,
management currently estimates roughly 40% of the $250 million target will
come from overhead reductions while 60% would come from improved
supply chain enhancements.
■ Timing & Price—APD remains committed to the acquisition and will be slow
and methodical in its approach. With regard to price, APD indicated they will
“not bid against themselves” implying to us that no new/higher bid would be
coming without 1) another competitive offer, or 2) ARG making a genuine
effort to negotiate with APD.
For investors with a 12-month time horizon, we believe APD offers a compelling
risk/reward profile—at 8.2X 2010 and 7.5X 2011, the stock is at the low end of
its historical multiple range and appears to be assuming