Praxair wants to ditch home care

Thursday, January 6, 2011

DANBURY, Conn. - Once there were three industrial gas giants in the homecare market. Soon there could be none.

In a Dec. 15 press release, Praxair stated that it plans to sell its U.S. homecare division. The news surprised few industry watchers, who say negative pressures in the HME market require that providers go all in or get out, and with homecare representing only $150 million of about $10 billion in annual sales, Praxair chose the latter.

"Home care requires ongoing investment," said Bob Leonard, a managing director with The Braff Group, an M&A firm in Pittsburgh. "What happened was, the homecare division had to compete with the other divisions for capital, and as reimbursement got ugly and their returns got lower, they weren't able to compete. They were just treading water."

Praxair will likely join the ranks of Air Products & Chemicals and Air Liquide, which gave up on the homecare market in 2009 and 2005, respectively. Praxair's 1,100 employees provide home oxygen, sleep and nutritional products from 85 locations.

Praxair, Air Products and Air Liquide entered the homecare market in 2005, 2002 and 2000, respectively to take advantage of synergies between making gases and providing them to patients. What they found out: As a side business, home care might be more of a hassle than it's worth.

"There are numerous examples of companies outside the industry that have dipped their toes into the water and changed their minds," said Rick Glass, president of Steven Richards & Associates, an M&A firm in Tarpon Springs, Fla. "They see how different it is and how much it's changing."

A Praxair spokesman told The Stamford Advocate: "There are a number of prospective buyers." Industry watchers suspect those buyers are large providers looking to consolidate locations--Lincare and Apria, for example--rather than outside investors like private equity firms.

"In an era of declining reimbursement, it's all about taking a location with 1,000 patients, keeping the same number of employees and getting it to 2,000 patients," Glass said. "That's what everyone's trying to do right now: build bigger branches."

Attempts by HME News to reach Praxair officials were unsuccessful.