The Beginning
Airgas Chairman and CEO Peter McCausland founded the company, then known as US Airgas, by acquiring Connecticut Oxygen Corporation (Connox) in February 1982. The company (Airgas) is today the largest distributor of packaged industrial, medical and specialty gases as well as welding & cutting equipment and one of the largest distributors of safety supplies in the United States. So how did it all begin?
“I was a young lawyer working for the US subsidiary of Messer and I got a lot of experience with financing and acquisitions, and I learned the gas business,” says McCausland. A few months before leaving Messer, he had recommended that they buy a distribution company called Connecticut Oxygen. “It was a little different from the average distributor as it had a very large bulk resale business. It was almost 70% gas and it was very profitable.”
Messer did not want any more acquisitions then, so after McCausland left the company to start his own law practice, he set about raising $1m of equity and $4.5m of debt to buy the company. “The original idea was it would just be an investment or a nest egg,” he explains.
In time, McCausland realised that the distribution side of the industrial gas business in the US was ripe for consolidation.
The company started to make smaller acquisitions. “I realised that we had a good formula for running businesses and so I set about to raise enough cash to fund an aggressive roll-up strategy,” he explains. More than a dozen acquisitions later, US Airgas had $37m in annual sales, and completed a reverse merger with Werco, Inc., a $68m supplier to the industrial gas industry. The result was Airgas, with sales of over $100m. “The idea was to go public and use the proceeds from the public offering, plus the eventual sale of Werco manufacturing units to fund an aggressive roll-up of industrial gas distributors in the US,” McCausland says. “And that’s essentially what happened.”
Airgas sold Werco manufacturing units during the late 1980’s leverage buy out boom. “Going into the 90’s we had plenty of cash flow and borrowing capacity to continue with an aggressive roll-up, we were over the hump – that’s how we got started.”
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