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PAG inches forward with AirPower sale talks – sources

Buyout PE house PAG is inching forward with sale talks over Shanghai-based AirPower Technologies, according to two sources familiar with the situation.

Private talks between buyers and Hong Kong-based PAG have been ongoing in recent months over AirPower, the leading Chinese industrial gas and service provider, the sources said.

The buyer mix comprises three potential bidders who intend to conduct due diligence on-site by the end of this year, according to the first source familiar.

The asset has also drawn strategic buyer interest from large multinational corporates in the industrial gases sector, the second source added.

The sector’s largest global players include Ireland-headquartered Linde [NYSE: LIN], France’s Air Liquide [EPA: AI], and Pennsylvania-based Air Products [NYSE: APD].

Buyers await economic data

While a sale plan of AirPower has seen some progress, the interested parties are still waiting for more economic data from China as well as AirPower’s latest financial figures for the full year of 2022, before moving forward, the first source said.

China’s weak economic outlook had previously dissuaded takeover interest for AirPower, as reported by Mergermarket earlier this May. But recent data showing lower-than-expected inflation could sway potential investors the other way, said the first source.

China’s consumer price index (CPI), a key inflation gauge, fell for the first of time in two years after reporting a 2.1% year-on-year (YoY) increase in October, as per data from the National Bureau of Statistics. The country’s CPI saw a 2.8% YoY rise in September.  

AirPower accounts for 12.6% market share in China’s industrial gases market in 2020, according to the company website.

The possibility of conducting on-site due diligence may also be hindered by lockdowns triggered by China’s prolonged zero-COVID policy, the first source noted.

Talks have valued the asset at around USD 4bn-USD 5bn, the sources said, although PAG has been reportedly asking for over USD 10bn.

AirPower Technologies comprises Yingde Gases Group and Shanghai Baosteel Gases Group. In 2017, PAG acquired Yingde Gases Group in a deal worth around HKD 11.3bn (USD 1.4bn).

However, the private equity firm would still not rule out an initial public offering (IPO) of AirPower if market conditions were to improve, the first source said.

In August 2021, AirPower filed for a Hong Kong listing with Goldman Sachs, JP Morgan and Morgan Stanley as joint sponsors, as announced. Its IPO application has since lapsed.

Mergermarket first reported in December 2021 that PAG was exploring a dual-track process for AirPower.

Established in 2001, AirPower Technologies supplies bulk and specialty airgas products to metallurgical, chemical, and general industrial customers.

PAG declined to comment. Airpower did not respond to requests seeking comment.