FTC Settlement Would Preserve Competition in Liquid Oxygen and Liquid Nitrogen Markets if Air Products Acquires Rival Airgas

Industrial gas supplier Air Products and Chemicals, Inc. has reached an agreement with the Federal Trade Commission that will require the company to sell certain liquid gas assets if it proceeds with its proposed hostile takeover of competitor Airgas, Inc. The proposed settlement agreement resolves FTC charges that Air Products’ proposed acquisition of Airgas would harm competition in five regional markets for bulk liquid oxygen and bulk liquid nitrogen, which are used in a range of applications from hospital patient care to the manufacture of frozen foods.

Air Products is a global supplier of industrial, medical, and specialty gases used in a variety of industries, including health care, technology, and energy. It is the second-largest industrial gas supplier in the United States, with 32 liquid atmospheric gas-producing plants nationwide. Airgas is the fifth-largest industrial gas supplier in the United States. It operates 16 plants nationwide, most of which are concentrated in the eastern part of the country. Airgas is also the largest U.S. distributor of packaged industrial, medical, and specialty gases and of hardgoods, such as welding equipment and supplies.

On February 11, 2010, Air Products announced its intention to acquire all of the outstanding shares of Airgas under an all-cash tender offer for approximately $7 billion, including assumption of debt. Airgas’ board of directors has opposed Air Products’ offer.

According to the FTC’s complaint, Air Products’ acquisition of Airgas, as originally proposed, would eliminate direct competition between the two companies in five U.S. regions and likely would allow the combined firm to exercise its market power to set prices for bulk liquid oxygen and bulk liquid nitrogen. In addition, the proposed transaction would increase the likelihood of collusion or coordinated action among the firms remaining in each market, the FTC contends.

The settlement agreement is designed to remedy this competitive harm by requiring that, if Air Products succeeds in its hostile takeover, Air Products sell 15 air separation units (ASUs) and related assets that are currently owned and operated by Airgas. The ASUs are used to separate atmospheric air into nitrogen, oxygen, and its other primary components. The units to be sold are in Bozrah, Connecticut; Carrollton, Kentucky; Canton, Ohio; Dayton, Ohio; New Carlisle, Indiana; Madison, Wisconsin; Waukesha, Wisconsin; Carrollton, Georgia; Jefferson, Georgia; Gaston, South Carolina (two ASUs); Rock Hill, South Carolina; Chester, Virginia; Mulberry, Arkansas; and Lawton, Oklahoma. As a result of this agreement, Air Products would face the same competition in those areas as it does now.

Under the proposed settlement order, Air Products would have to sell these assets to a buyer within four months after it acquires Airgas. If Air Products is unable to complete the acquisition by February 15, 2011, the FTC may require Air Products to seek prior approval of a buyer before it could close any transaction. This would provide the FTC with an opportunity to evaluate the continued availability of acceptable buyers.

The Commission vote approving the proposed consent order was 5-0. The order will be subject to public comment for 30 days, until October 11, 2010, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. To submit a comment electronically, please click on: https://ftcpublic.commentworks.com/ftc/airproducts.

NOTE: The Commission issues a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

Copies of the complaint, consent order, and an analysis to aid in public comment can be found on the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.