2/9/2010-Air Product and Chemicals Inc (NYSE:APD) was downgraded to Hold from Buy at Citigroup Equity Research, and its target price was cut to $73 from $96 with the bank saying are "moving to the sidelines" as they see APD's hostile bid for Airgas (NYSE:ARG) being likely to drag out for several months.

Citigroup analyst P.J. Juvekar said, "APD has left the door open to raising its bid, which is likely to create uncertainty and keep a lid on APD's share performance in the near term. APD's current Debt/EBITDA ratio of 2.1x would increase to 4.1x with the current $60/share offer. We analyzed three scenarios and believe APD can raise the offer without any risk of losing its investment-grade rating. The multiple offered is in-line with 11 other industrial gas transactions we analyzed."

Juvekar went on to say, "We were surprised by APD's move to reenter the US packaged gas business after selling it to Airgas in '02. Since then, Airgas has done the "heavy lifting" by consolidating the industry. In our view, the deal could potentially distract APD management's focus from growing its project pipeline and enhancing returns. As such, the ARG deal is initially dilutive to ROC, but accretive to revenues and earnings."

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