Chart Industries acquires L.A. Turbine

 Chart Industries, Inc. (“Chart”) has acquired L.A. Turbine (“LAT” or “L.A. Turbine”) for $80 million. L.A. Turbine is a global leader in turboexpander design, engineering, manufacturing, assembly and testing process for new and aftermarket equipment, with significant in-house engineering expertise.

Expanders are utilized in the following Chart offerings, and with LAT in the Chart portfolio, we now can offer a more comprehensive “one stop shop” solution and provide more options for our customers in these applications:

• Hydrogen & helium liquefaction
• Carbon capture and energy storage
• Industrial gas
• Natural gas processing
• Small-scale LNG plants
• Propane dehydrogenation (PDH) plants
• Heavy hydrocarbon removal process for LNG plants
• Petrochemical

This acquisition aligns with our inorganic investment principles and contributes to our financial growth and strength through expanded revenue and profit. LAT’s capabilities are a natural fit and deliver a competitive point of differentiation for Chart. There is a very unique expander required for hydrogen and helium liquefaction which is difficult to obtain in the market due to a limited number of companies like LAT that are capable of designing and producing it. Further, within the last three years, the other qualified suppliers have been acquired by companies that only use their hydrogen and helium turboexpanders for in-house dedicated purposes (i.e. discontinuing sales to third parties). These very specialized expanders are difficult to design and produce as they require very high efficiency, in some cases oil free machines, foil bearings for plants producing 10 tons per day and smaller, and magnetic bearings for larger helium and hydrogen liquefaction plants. Plus, this part of the liquefier is one of the longest lead-time items at one to two years depending on the configuration. L.A. Turbine has these capabilities in-house and our ownership of these capabilities will further position us to win liquefaction projects and deliver them in significantly shorter timeframes, a further differentiator in the expanding liquefaction market.

“It is an exciting time for Chart and L.A. Turbine as we now work together to bring our customers expanded solutions across multiple molecules, including nearly all types of energy sources and multiple industrial gas applications,” stated Jill Evanko, Chart’s CEO and President. “L.A. Turbine is one of the only turboexpander engineering and manufacturing companies that can design and produce very specialized expanders; one of the longest lead time items in the hydrogen and helium liquefaction supply chain. With this capability in house, we are further differentiated in liquefaction – not just from decades of experience but also from world class efficiency and now, significantly shorter and guaranteed delivery times.”

Couple the above complementary nature of the business with the fact that our companies have worked together for numerous years and we expect to have immediate and significant synergies including expanded field service and repair capabilities (LAT is the global leader in servicing all brands of turboexpanders).  

“Since our company’s inception, L.A. Turbine’s focus is to be the go-to turboexpander solution provider, as an OEM of highly-engineered rotating equipment designs and process solutions for engineering, procurement and construction clients and end-user operators as well as aftermarket, service and repair. With Chart we can both capitalize on emerging market opportunities while also enhancing and extending the reach of the value chain to our collective customers through our people, technology, infrastructure and financial assets,” stated Danny Mascari, President, L.A. Turbine. “In addition, we remain committed to providing the top-of-the-line FX-TURBO aftermarket service our turboexpander customers have come to know and expect.”

Additionally, this acquisition builds on other recent additions to our portfolio, including Cryo Technologies’ helium and hydrogen liquefaction capabilities which will also utilize L.A. Turbine’s equipment.   Both of our businesses have very active commercial order pipelines and there are multiple requests for hydrogen liquefaction and processing as well as a variety of energy projects.

LAT is expected to be immediately accretive to Chart, with 2021 positive impact to full year guidance to be shared on Chart’s second quarter 2021 earnings call which is scheduled for July 22, 2021. Looking ahead to 2022, when we will have ramped up our combined benefits, L.A. Turbine is expected to contribute between $40 and $50 million of revenue and $0.20 to $0.30 of non-diluted earnings per share on approximately 35.5 million weighted shares outstanding (assuming tax rate of 18%). Additionally, our total addressable market (“TAM”) for our specialty products is expanded by $350 million resulting from this acquisition – the result of the expanded TAM for hydrogen liquefaction, helium liquefaction and carbon capture with energy storage. This addition brings our total near-term specialty products addressable market size to $6.6 billion.

Winston & Strawn LLP served as legal advisor to Chart on the transaction. No investment bankers were engaged in this transaction.  

 

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