Praxair to Finalize Investment in NuCO2 Acquisition in Q1 of 2013



praxairPraxair has recently announced it had agreed to buy NuCO2, one of the top providers of beverage carbonation solutions to the restaurant and hospitality industries in the US.  To make this acquisition, Praxair paid $1.1 billion in cash to the company’s owners, private equity firm Aurora Capital Group. NuCO2 employs a staff of 900 who cater its customers in over 162,000 locations. As the acquisition won’t have a major impact on Praxair share performance, the company’s investment recommendations by analysts have been unchanged.

NuCO2 offers micro-bulk beverage carbonation solutions to quick service restaurants and convenience stores that provide fountain beverages to their customers. Through this investment, Praxair aims to expand its product offering for establishments selling draught and craft beers, giving them the possibility to include nitrogen generations and blending control systems.
Eduardo Menezes

“NuCO2 offers a compelling value proposition for beverage carbonation. We plan to continue to grow. the business in the United States, enhance distribution efficiency utilizing Praxair’s competencies in logistics, and extend NuCO2’s offerings to customers in other regions of the world,” said Executive vice president Eduardo Menezes (pictured). 

Praxair seems to have made a smart investment as NuCO2 will generate sales of $250 million in 2013 and an annual EBITDA of $115 million. Yet the deal will be neutral or have a minor positive effect on Praxair’s earnings per share for 2013. It will be completed in Q1 of this year after going through the process of being approved by regulatorsThe deal is expected to be neutral or slightly accretive to Praxair’s earnings per share in 2013, is expected to close in the first quarter of 2013 and is subject to regulatory approval and normal closing conditions.

At the end of 2012, Praxair, whose market value is of $32.7 billion, announced $152 million in cash and equivalents and operting a short and long term debt of $7.36 billion. The company generated $11.2 billion in revenue and net earnings of $1.69 billion, which translated into #5.61 per diluted share. 2013 full year revenues are forecast to reach $12 billion and per share earnings of $5.85-6.10, all up from the 2012 values. The market currently values Praxair at $32.7 billion. This values the firm at 2.7 times 2013’s annual revenues and 18-19 times annual earnings. Praxair pays a quarterly dividend of $0.60 per share for an annual dividend yield of 2.2%.