Praxair to Buy NuCO2 for $1.1 Billion

On Tuesday, Praxair (NYSE: PX  ) announced that it has signed an agreement to buy beverage carbonator NuCO₂ Inc. from private equity firm Aurora Capital Group for $1.1 billion in cash.

With $250 million in projected sales for 2013, NuCO₂ is selling for approximately 4.4 times annual sales, a sizable premium to the 2.9 times sales valuation of Praxair's own shares. On the other hand, NuCO₂'s $115 million in annual earnings before interest, taxes, depreciation, and amortization shows the companies' price-to-EBITDA valuations are much more comparable. Praxair commands a 9.3 P/EBITDA ratio, versus the 9.6 ratio it's paying for NuCO₂.

Praxair appears to think the premiums are worth paying, however, in order to gain control of NuCO₂'s "leading" position in the market for "micro-bulk carbonation" of beverages for quick-service restaurants, convenience stores, and craft beer vendors. The deal is expected to close by the end of this quarter. NuCO₂ has 162,000 customer locations and 900 employees.

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