Chart Industries (NYSE:GTLS) unveiled the acquisition of Howden, which provides air and gas handling products, from the affiliates of KPS Capital Partners. GTLS expects to fund the $4.4 billion deal through cash and a newly created class of preferred stock. Though the company listed multiple benefits from the transaction, investors remained unimpressed. As a result, the stock slumped 35.6% following the announcement.
Chart Industries is a manufacturer of equipment for the energy and industrial gas markets.
While Chart Industries has a strong history of synergistic acquisitions (completed 10 strategic bolt-on acquisitions in the past three years), the increase in its leverage profile following the completion of the deal (expected to close in 1H23) could have irked investors.
The company has secured a $3.375 billion bridge financing from J.P. Morgan (NYSE:JPM) and Morgan Stanley Senior Funding, Inc. (NYSE:MS). This will lead to an increase in Chart’s net leverage ratio, which the company expects to reduce to its target range of 2.0x to 2.5x by the end of 2024.
Is Chart Industries a Buy, Sell, or Hold?
On TipRanks, Chart Industries is a Strong Buy based on nine unanimous Buy recommendations. Moreover, the analysts’ average price target of $238 implies 54.2% upside potential.
Along with analysts, GTLS stock has a positive signal from hedge funds. Our data shows that hedge funds bought 139.4K GTLS stock last quarter. Meanwhile, Chart Industries stock has an Outperform Smart Score of “Perfect 10” on TipRanks.
