Why Chart Industries (GTLS) Is Buying Howden For $4.4 Billion In Cash

By Amit Chowdhry ● Nov 9, 2022
  • Chart Industries (GTLS) announced it is buying Howden in a deal valued at $4.4 billion. This is why.

Chart Industries (GTLS) announced that it has signed a definitive agreement to acquire Howden, a leading global provider of mission-critical air and gas handling products and services, from affiliates of KPS Capital Partners, LP. The purchase price is $4.4 billion and will be funded through a combination of cash and shares of a newly created class of preferred stock. This acquisition is subject to the receipt of certain regulatory approvals and the satisfaction of other customary closing conditions and is expected to close in the first half of 2023.

This acquisition will result in estimated combined revenue of approximately $3.4 billion based on the trailing twelve months as of August 31, 2022. And the purchase price represents 12.9x Howden’s adjusted EBITDA for the 12 months ended August 31, 2022, or 8.5x including estimated annual cost synergies of $175 million to be achieved in the first 12 months of ownership ($250 million annual cost synergies by year three). Along with cost opportunities, Chart has identified significant commercial synergies that are expected to reach $350 million annually by year three.

Howden, based in the U.K., is a leading global provider of mission-critical air and gas handling products providing service and support to customers around the world in highly diversified end markets and geographies. Howden manufactures highly engineered fans, compressors, rotary heat exchangers, steam turbines, and other air and gas handling products, services, and solutions. With more than 160 years of experience as a world-class application engineering and manufacturing company, Howden enables customers to achieve environmental and operational targets and efficiencies, including decarbonization of operations.

Strategic Benefits

1.) The expanded portfolio will increase scale, bring synergies and drive growth in areas including hydrogen, carbon capture, and storage (CCUS), decarbonization of industries, water treatment, petrochemical, LNG, air separation and natural gas processing.

2.) Lead-time and delivery schedules are top customer decision points for placing orders in liquefaction, given the macro trend of energy access and resiliency and desire for fastest implementation. And Chart will benefit from integrating Howden’s compressors in its offering where applicable as compressors are the longest lead-time item in the current environment for hydrogen, helium and small-scale LNG liquefaction.

3.) The combination of the two companies will create a more diversified business while staying focused on Chart’s core engineering and manufacturing for liquid, air and gas handling and storage. And Howden’s strong presence in regions such as Europe, Middle East, Africa and Southeast Asia, as well as applications in cement, marine, mining, and nuclear, will allow us to expand their customers and projects using their combined solution offering, while Chart’s exposure to LNG (particularly small-scale LNG which is applicable to Howden’s product offerings), water, CCUS and hydrogen in a variety of regions will pull Howden’s equipment through at scale to these markets.

4.) Howden has 450 issued patents and patent applications across multiple jurisdictions worldwide and over 800 trademark applications and registrations worldwide adding to Chart’s existing portfolio of 778 patents and patent applications and 569 trademark applications and registrations.

5.) Aftermarket, service and repair comprise approximately 48% of Howden’s and approximately 14% of Chart’s revenue. And combined, this will be over 30% of pro forma revenue with approximately 42% gross margin as a percent of sales. The addition of this high-margin aftermarket business will lift the combined margin profile, add resiliency and reduce cyclicality.

6.) After closing, the company will quickly take advantage of the One Chart global commercial and global engineering approach, which will, with Howden’s engineering and manufacturing expertise, allow for more first-of-a-kind opportunities and double-digit global growth.

7.) In the past three years, Howden completed seven highly-synergistic bolt-on acquisitions, and in that same time period, Chart completed 10 strategic bolt-on acquisitions and divested two non-core businesses. Both teams have experience in and dedicated resources for successful integration planning and execution.

Financial Benefits

— Chart and Howden combined backlog of approximately $3.7 billion as of September 30, 2022 supports near-term double-digit growth outlook.

— Significant cost synergies of approximately $175 million and revenue synergies of $150 million expected to be delivered in the first 12 months after closing.

— The combined business is expected to generate over 90% free cash flow conversion in the first 12 months of ownership, inclusive of cash flow from synergies. And this leads to an estimated pro forma net leverage ratio in the high 2x range by the end of 2024, assuming a first half 2023 close of the acquisition.

— The acquisition is expected to be accretive to EBITDA margins, free cash flow and EPS in the first full year of ownership.


“The combination of Chart and Howden furthers our global leadership position in highly engineered process technologies and products serving the Nexus of Clean – clean power, clean water, clean food and clean industrials. The offerings of Chart and Howden are highly complementary, bringing multiple cost synergies, commercial synergies and efficiencies in the first year, along with significant aftermarket, service and repair exposure, which lifts the margin profile of the combined business, adds resiliency and broadens our end markets. The two companies have shared customer-centric values and are both very committed to innovation which will result in expanded reach into global markets and acceleration in product development.”

— Jill Evanko, Chart’s CEO and President

“I am thrilled that Chart has agreed to acquire Howden. This acquisition will provide benefits for both businesses, as well as our team members and customers. Over the past years, Howden and Chart have worked together on various projects, and through these activities we have witnessed first-hand the potential synergies of this combination, as well as the aligned values and cultures of the two companies. Our complementary offerings will enable the combined organization to offer customers an even broader set of innovations, solutions and services.”

— Ross Shuster, CEO of Howden