PX

Praxair Inc

Industrial/Transportation, Event Driven/Special Sit


Presented:04/24/2017
Price:$123.01
Cap:$35.42B
Current Price:$11.20
Cap:$1.25B

Presented

Date04/24/2017
Price$123.01
Market Cap$35.42B
Ent Value$43.17B
P/E Ratio23.57x
Book Value$17.62
Div Yield0.03%
Shares O/S287.96M
Ave Daily Vol1,355,447
Short Int1.63%

Current

Price$11.20
Market Cap$1.25B
Praxair, Inc. is an industrial gas supplier in North and South America. It designs, engineers, manufactures and operates facilities that produce and distribute industrial gases. It operates through the following segments: North America, Europe, South America, Asia, and Surface Technologies. The North America segment operates production facilities in the U.S., Canada, and Mexico. The Europe segment has production facilities primarily in Italy, Spain, Germany, the Benelux region, Scandinavia, and Russia which include approximately 60 cryogenic air separation plants. The South America segment covers more than 45 cryogenic air separation plants, primarily located in Brazil. The Asia segment has production facilities located in China, Korea, India, and Thailand, 55 of which are cryogenic air separation plants. The Surface Technologies segment offers coating services and manufactures coating equipment. The company was founded in 1907 and is headquartered in Danbury, CT.

Publicly traded companies mentioned herein: Linde AG (LIN GR), Praxair Inc (PX)

Highlights

The presenter is long shares of both Praxair (PX) and Linde (LIN GR) following the announcement of their [pending] “merger of equals”. While he has “no edge” on the arbitrage spread (~10-11%), he does view the setup as attractive and thinks shareholders will be rewarded in the long-run. With the stocks trading at ~$123 and €160, respectively, both companies’ market caps are ~$40 billion and the pro forma company would of course be ~$80 billion and have just 1.5 turns of debt. Praxair’s EBITDA margins are stronger than Linde’s by ~800 bps, so that is one opportunity, and overall synergies could exceed $1 billion. He uses a 19.5-20x multiple on $8+ of future EPS to arrive at a $160-170 target range in PX terms, and Linde (using 1.54 shares) would be worth 226 euros given the current exchange rate (>30% upside on both stocks).

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Idea Discussion

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