Chart Industries Inc. (Chart), a company that engineers and manufactures process technology and equipment for industrial gas, specialty, and energy transition markets, has completed its acquisition of Howden, a global provider of mission critical air and gas handling products and services, from affiliates of KPS Capital Partners LP (KPS).
The combination of Chart and Howden expands Chart’s offering of products and solutions across its Nexus of Clean. The Nexus of Clean refers to Chart’s integrated solution set across power generation, the industrial sector, water, and food. The combination also provides access to new specialty products and ESG-linked end markets such as nuclear, energy recovery, and electrification. The acquisition expands Chart’s market opportunity across stationary and rotating equipment. About 750 Howden engineers will join Chart, doubling Chart’s global engineering team to more than 1500 people.
Details Of The Deal
Chart paid a purchase price of approximately US$4.4 billion in cash, before customary purchase price adjustments. Chart funded the purchase price and the payment of acquisition-related expenses through a combination of cash on hand, the proceeds from previously consummated debt and equity financings, and the proceeds from a tranche of term loans that closed concurrently with the acquisition. As a result of Chart’s cash on hand and the debt and equity financings, the purchase price was paid solely in cash and no preferred stock was issued (to KPS or otherwise).
“We are excited to welcome the Howden team to the Chart family and look forward to the combined business executing on record momentum and well-defined synergies,” said Jill Evanko, CEO and president of Chart. “Since we announced the combination in November 2022, Chart has received numerous inbounds from customers that see the combined benefits we can offer.”
Through the acquisition of Howden, Chart has gained immediate access to new customers and commercial opportunities, increasing its geographic footprint to more than 35 countries. This geographic footprint allows for increased commercial and manufacturing capabilities as well as the ability to bid on projects regionally that were not previously accessible. As a result, Chart is on track to meet or exceed its previously announced targets for US$175 million of annualized cost synergies and US$150 million of commercial synergies in the first 12 months of ownership.
Chart estimates that aftermarket, service, and repair will represent approximately 30% of the combined organization with approximately 42% gross margin as a percent of sales. The increased global reach, coupled with two large existing installed bases, will result in less business cyclicality. Chart will leverage Howden’s digital offerings of Uptime and Ventsim across its global installed base.
The new Chart executive management team will include a balance of Chart and legacy Howden executives. Both companies saw strong demand in Q1 2023, with Chart’s orders as of March 15, 2023, above US$520 million.
Gross order intake for Howden in Q4 2022 was US$534 million, a new record high, and for the full year the gross order intake was US$2 billion. Howden’s renewable hydrogen orders were up 47% in 2022. As of December 31, 2022, Howden’s backlog was US$1.3 billion.
As previously disclosed, Chart is pursuing the divestitures of two product lines related to the combined business. While there can be no assurances it will complete these divestitures, it is progressing with discussions with potential buyers. Chart anticipates progressing to completion either in Q2 or early Q3 2023.