Could Praxair be next in line?

Sunday, August 31, 2008

Will Praxair follow Air Products in throwing in the towel on its healthcare business? Industry watchers say it may.

With reimbursement on the decline and a 36-month oxygen cap looming, it could be time to get out, said industry watchers.

“I’ve heard that, internally, they may be discussing whether they want to be in the business or not,” said one industry source.

Praxair had worldwide sales of $9.4 billion in 2007. U.S. homecare sales are $285 million.

Like Air Products, Praxair was already a giant in industrial gas when it moved into the home medical equipment market several years ago.

“When oxygen is the primary product you manufacture, opening an additional distribution channel seems to make operational sense,” said Jonathan Sadock, CEO of Paragon Ventures, a Philadelphia-based M&A firm. “But the business model is radically different.”

Air Products is not the first gas company to exit the HME market. In 2005, Air Liquide sold the U.S. operations of its seven-year-old HME, VitalAire Homecare, to Apria.

“I think the other guys were surprised when Air Liquide got out of the home oxygen business,” said Bob Leonard, an associate with Pittsburgh, Pa.-based The Braff Group. “In hindsight, maybe they had the right idea.”