Industrial gas producer and supplier, Praxair Inc. (PX) prepares to add another asset to its portfolio; this time it is a California-based beverage carbonator, NuCO2 Inc.
The deal agreed upon between Praxair and a private equity firm, Aurora Capital Group is valued at approximately $1.1 billion in cash and is expected to be complete by the end of the first quarter of 2013, upon fulfilment of customary closing conditions.
NuCO2 has operations spread over 162,000 locations in the United States and is popular among the restaurant and hospitality industries. It is expected to generate approximately $250 million in revenue in 2013.
The addition of the NuCO2 assets will not only enhance Praxair’s product portfolio but also enable it to leverage benefits by expanding the fizz business to other parts of the world. Further, the acquisition is expected to be neutral to slightly accretive to Praxair’s earnings in 2013.
So far acquisitions have been Praxair’s preferred way of expansion into new businesses and markets. Prior to this acquisition, the company in Dec 2012 acquired PortaGas, a renowned producer of portable cylinder gases for the specialty gases market. In Nov 2012, Praxair had acquired Texas-based independent gas and wielding products distributor, Acetylene Oxygen Company (:AOC).
Long-term growth prospects are now bright for the company. Praxair’s policy of returning values to shareholders through dividends and share buybacks as well as strategic acquisitions and joint ventures have a good deal of potential and will also help the company in achieving its long-term target of annual organic sales growth of 8%-12% by 2015.
The current Zacks Consensus Estimate for the first quarter of 2013 is $1.39, representing a year-over-year increase of 0.4%. Estimates for 2013 and 2014 are $5.99 and $6.79, reflecting annual growth of 7.6% and 13.4%, respectively.
The stock currently carries a Zacks Rank #4 (Sell). Other stocks to watch out for in the industry are Arkema S.A. (ARKAY), with a Zacks Rank #1 (Strong Buy) and BASF SE (BASFY) and Air Products & Chemicals Inc. (APD), each with a Zacks Rank #2 (Buy).
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