Chart Industries prices share offering to help finance takeover of US air compression business

Thursday, 13 June 2019

Chart Industries, the US LNG and industrial gases equipment provider, has priced its underwritten public offering of 3.5 million shares at $73.50 per share to fund a portion of the purchase price of its pending acquisition of Harsco Corp.’s Industrial Air-X-Changers business.

Chart has also granted the underwriters a 30-day option to purchase up to an additional 525,000 shares.

The company estimates that the net proceeds of the offering will be around $248.8 million, or $286.3M if the option to purchase additional shares by the underwriters is exercised in full, after deducting underwriters discounts and commissions and transaction expenses.

Chart’s shares were last trading on June 12 at $74.55 on the Nasdaq global stock exchange, valuing the company at $2.37 billion.

J.P. Morgan Securities, Credit Suisse Securities (USA) and Morgan Stanley & Co. acted as joint lead book-running managers for the offering and Evercore Group and Wells Fargo Securities will act as book-running managers.

Chart’s previously arranged financing consists of a revolving credit facility and a new term loan, both of which were over-subscribed by banks keen to lend.

The share offering was closing on June 14, concurrent with the finalization of the commitment from banks for $1.1 billion in credit facilities.

Chart said the acquisition of Harsco’s Air-X-Changers business was now expected to close on July 1.

“While our proposed offering of common stock was significantly over-subscribed, the associated pricing was at the lower end of our anticipated range,” said Chart Chief Executive Jill Evanko.

“We decided to size the offering to a level that would meet the needs of the business and support our growth and profitability objectives, while also acting in the interest of current shareholders by reducing anticipated dilution,” the CEO explained.

Chart, based in the outskirts of Atlanta, Georgia, agreed in May 2019 to take over Harsco in its fourth acquisition in two years as it continues to receive LNG orders for key equipment.

The Harsco AXC business specializes in gas compression coolers.

The company reiterated its full year 2019 sales forecast of between $1.41 billion and $1.46Bln.

The guidance assumes LNG project revenue in 2019 from the Venture Global Calcasieu Pass and “Golar Gimi” LNG production hull projects of $28M to $30m, subject to project timing.

Harsco AXC is projected to generate net sales of around $260M in 2019, and a 23 percent gross earnings margin as a percentage of sales.

The Chart acquisition is the fourth in the past two years after other takeovers in the US and Europe.

Chart first expanded its business in 2017 by acquiring German company VCT Vogel, a servicer of cryogenic and mobile gas tank equipment and trucks and a European leader in truck-mounted drive and control systems.

The takeover of the German company followed its $410M cash purchase of smaller US sector rival Hudson Products for its range of air-cooled heat exchangers and axial flow cooling fans for the refining, petrochemical and natural gas markets.

Then in September 2018, Chart agreed to acquire Italian company VRV S.p.a., an engineer and designer of cryogenic equipment whose offerings also complement Chart’s products.

The Harsco group has said that the proceeds from selling its Harsco AXC gas compression subsidiary would be used to pay debts and provide the parent company with additional financial flexibility to its transformation into an environmental solutions operator.