Honeywell (Nasdaq: HON) and Air Products (NYSE: APD) have announced their agreement on a notable $1.81 billion all-cash transaction, where Honeywell will acquire Air Products' liquefied natural gas (LNG) process technology and equipment business. This strategic move is aimed at significantly enhancing Honeywell's capabilities in the energy transition market by offering an integrated, end-to-end solution for managing energy transformation globally.

The acquisition is poised to immediately augment Honeywell's sales growth and segment margin, with expectations to also positively impact adjusted earnings per share (EPS) in the first full year of ownership. Honeywell's acquisition approximates 13x the estimated 2024 EBITDA of Air Products' LNG business, underlining the financial attractiveness and growth potential of this deal.

Air Products, through this divestiture, will concentrate more on its core industrial gas operations and related technology and equipment. Additionally, it aims to spearhead the clean hydrogen sector to support the decarbonization of the industrial and heavy-duty transportation sectors. Air Products assures that its LNG business, which is at its strongest in decades, will thrive under Honeygoingwell's stewardship.

The LNG market has experienced exponential growth, quadrupling over the last two decades with expectations to double again in the next two. The acquisition brings together complementary technologies from both companies, including Honeywell's pre-treatment solutions and Air Products' state-of-the-art liquefaction processes and coil-wound heat exchangers (CWHE). These technologies are critical for efficient, reliable, and optimized natural gas asset management. CWHEs, known for their high throughput, small footprint, and reliable operations, will significantly bolster Honeywell's installed base and open up novel growth avenues in aftermarket services and software through digitalization and the Honeywell Forge platform.

Headquartered in Allentown, Pennsylvania, with a manufacturing facility in Port Manatee, Florida, Air Products' LNG business employs approximately 475 people and is renowned for producing CWHEs of all sizes. Honeywell's strategic acquisition aligns with its capital deployment strategy, focused on investing in high-return acquisitions across compelling megatrends such as automation, aviation's future, and energy transition.

This acquisition not only underscores Honeywell's commitment to being at the forefront of energy transition solutions but also highlights its dedication to offering scalable solutions and services that enable global customers to achieve sustainable and efficient energy practices. The transaction is set to close before the end of the calendar year, pending customary closing conditions and regulatory approvals.

Both companies express a strong forward-looking perspective, emphasizing the role of natural gas as a critical, lower-emission transition fuel in meeting dynamic global energy demands, while also focusing on the future through sustainable energy solutions. Honeywell and Air Products are poised to drive significant advancements in energy technology and services, reinforcing their positions as leaders in the industrial and energy sectors.