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Air Products and Chemicals, Inc. APD announced that Honeywell International Inc. HON will acquire APD's liquefied natural gas (LNG) process technology and equipment business for $1.81 billion in an all-cash transaction. This represents approximately 13 times the estimated 2024 EBITDA.

This acquisition will enable Honeywell to provide a comprehensive, top-tier solution for managing energy transformation. The new offering will include natural gas pre-treatment and advanced liquefaction, integrated with Honeywell's Forge and Experion digital automation platforms. This holistic solution aims to deliver efficient, reliable and optimized management of natural gas assets, offering significant value and support.

Currently, Honeywell supplies a pre-treatment solution for LNG customers worldwide. Air Products' LNG process technology and equipment business will add a broad portfolio, including the design and manufacture of coil-wound heat exchangers (CWHE) and related equipment. CWHEs offer high throughput of natural gas with a compact footprint and reliable, safe operations both onshore and offshore.

HON stated that natural gas is a crucial lower-emission, affordable transition fuel as the world builds a renewables-based energy infrastructure. This complementary acquisition strengthens Honeywell's energy transition portfolio and Air Products' CWHE technology expands its installed base, creating new opportunities for growth in aftermarket services and digitalization through Honeywell Forge.

Air Products noted that divesting the LNG heat exchanger technology and equipment business aligns with its strategy to grow its core industrial gas business and deliver clean hydrogen at scale to decarbonize industrial and heavy-duty transportation sectors. The LNG business is at its peak, thanks to a dedicated team, and will thrive under Honeywell's portfolio.

The LNG market has quadrupled in the past 20 years and is projected to double over the next two decades, driven by demand in key sectors like power and data centers, according to industry research.

Honeywell mentioned that integrating this talented team and proprietary technologies will allow Honeywell UOP to offer scalable solutions and services to help global customers transition to more sustainable and efficient energy practices.

Air Products' LNG business has about 475 employees, headquartered in Allentown, PA, with a 390,000-square-foot manufacturing facility in Port Manatee, FL, where CWHEs of all sizes are produced.

This acquisition is Honeywell's fourth this year as part of its capital deployment strategy, focusing on high-return acquisitions aligned with the megatrends of automation, aviation, and energy transition. The transaction is expected to be accretive to adjusted earnings per share in the first full year of ownership, with no financing conditions. It is anticipated to close by the end of the year, pending customary closing conditions and regulatory approvals.

APD’s shares have lost 13.1% in the past year compared with a 13.5% fall in the industry.

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Zacks Rank & Key Picks

APD currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Basic Materials space are Carpenter Technology Corporation CRS, Eldorado Gold Corporation EGO,and Axalta Coating Systems Ltd. AXTA. Carpenter Technology and Eldorado Gold sport a Zacks Rank #1 (Strong Buy), and Axalta carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CRS’s current-year earnings is pegged at $4.35, indicating a year-over-year rise of 282%. CRS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, the average earnings surprise being 15.1%. The company’s shares have soared 89.2% in the past year.

The Zacks Consensus Estimate for EGO’s current-year earnings is pegged at $1.09, indicating a year-over-year rise of 91.2%. EGO’s earnings estimates have gone up 10% in the past 60 days. EGO beat the consensus estimate in each of the last four quarters, the average earnings surprise being 430.7%. The stock has rallied 47.4% in the past year.

The Zacks Consensus Estimate for Axalta's current-year earnings is pegged at $1.99, indicating a rise of 26.8% from the year-ago levels. AXTA beat the consensus in three of the last four quarters while missing it once, the average earnings surprise being 7%. The stock has rallied nearly 2.8% in the past year.

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