Air Products struggles to offload HME

Sunday, March 15, 2009

ALLENTOWN, Pa. - Nearly a year after going on the market, the bulk of Air Products Healthcare remains up for sale.

Industry watchers aren't surprised.

"With the oxygen cap and national competitive bidding, there are a lot of land mines out there yet to be determined," said Bruce Burns, president of Affinity Ventures, an Albuquerque, N.M.-based mergers and acquisition firm. "So right now, it's too hard to price out any business, let alone one of this size."

Air Products announced in July that it was selling Air Products Healthcare. Since then, it has sold its A&J Care locations in New York and its COPD Services locations in New Jersey to Landauer Metropolitan. It has also sold Air Products Seating and Mobility, a division of Air Products Healthcare, to ATG Rehab.

But Air Products Healthcare has some 80 locations, many of them offering home infusion services.

"Of all the sectors in HME, home infusion has certainly been the most desirable and marketable in the past six months, so I thought something would have happened by now," said Rick Glass, president of Steven Richards & Associates, a Tarpon Springs, Fla.-based M&A firm.

Air Products' inability to sell its healthcare division may also have something to do with strategy: With the exception of A&J Care and COPD Services, it has been holding out for one buyer.

"They took a path that's often preferred--trying to sell the locations as one package, with the theory being the whole is worth more than the sum of the parts," said Bob Leonard, a managing director with The Braff Group, a Pittsburgh-based M&A firm. "But, in this instance, they called it dead wrong."

Leonard continued: "Selling the locations piecemeal would have been more work, but at least it would have gotten done."

At the end of the day, Air Products will succeed, one way or the other, industry watchers say.

"Everyone is being extra careful in this economic environment," said Jonathan Sadock, partner and CEO of Paragon Ventures, a Philadelphia-based M&A firm. "For Air Products, however, it is an active process."