Business Combinations

12 Months Ended

Sep. 30, 2012

Business Combinations

Business Combinations

5.  Business Combinations

INDURA S.A.

On 1 July 2012, we acquired a 51.8% controlling equity interest in the outstanding shares of Indura S.A. from the majority shareholder. On 3 July 2012, we acquired an additional 13.0% equity interest from other shareholders. We paid cash consideration in Chilean pesos (CLP) of 345.5billion ($690) and assumed debt of CLP113.8 billion ($227) for these interests. The preliminary purchase price is subject to adjustment as valuation of the assets acquired and liabilities assumed has not been finalized. Under the purchase agreement, we have a commitment to purchase an additional 2.0% equity interest within twelve months of the acquisition date. The agreement also provides the largest minority shareholder a right to exercise a put option to require Air Products to purchase up to a 30.5% equity interest during the two-year period beginning on 1 July 2015, at a redemption value equal to fair market value (subject to a minimum price basedupon the acquisition date value escalated by an inflation factor).

Prior to the acquisition, Indura S.A. was the largest independent industrial gas company in South America. Indura S.A.'s integrated gas and retail business comprises packaged gases and hardgoods, liquid bulk, healthcare, and on-sites. We expect the transaction to enhance our growth opportunities in South America.

For the year ended 30 September 2012, acquisition related costs of $11.4 were recognized for this transaction. Debt issuance costs of $4.9are included within interest expense and acquisition costs of $6.5 are included within selling and administrative expenses on the consolidated income statements.

The acquisition of Indura S.A. was accounted for as a business combination. Following the acquisition date, 100% of the Indura S.A. results were consolidated in our Merchant Gases business segment. The portion of the business that is not owned by the Company is recorded as noncontrolling interests.

The following table summarizes the fair value of identifiable assets acquired and liabilities assumed in the acquisition of Indura S.A.and the resulting goodwill as of the acquisition date. The purchase price and related allocation is notconsidered final, as valuation of the identifiable assets acquired and liabilities assumed has not been finalized. We will finalize the amounts recognized when we obtain the necessary information to completethe analysis, but no later than one year from the acquisition date.

	Allocation of Purchase Price
	Trade receivables, net	$	131.2
	Inventories		103.5
	Other current assets and (liabilities)(A)		(67.5)
	Plant and equipment		402.3
	Intangible assets		382.1
	Current portion of long-term debt and short-term borrowings		(70.8)
	Long-term debt		(279.8)
	Deferred income taxes		(133.7)
	Other noncurrent assets and (liabilities)		(9.6)
	Fair Value of Identifiable Net Assets Acquired	$	457.7
	Goodwill		620.8
	Noncontrolling interests (including redeemable noncontrolling interest)		(388.9)
	Total	$	689.6
(A)Includes cash and cash items, prepaid expenses, other current assets, payables and accrued liabilities, and other current liabilities.

The noncontrolling interests of Indura S.A., including redeemable noncontrolling interest, were recorded on the acquisition date at fair value. Refer to Note 16, Commitments and Contingencies, and Note 19, Noncontrolling Interests, for additional information.

Goodwill and Intangible Assets

Goodwill of $620.8is attributable to expected growth and cost synergies resulting from the acquisition. The goodwill is not deductible for income tax purposes.

We acquired identifiable intangible assets, primarily in the form of customer relationships and trade names and trademarks, with a total estimated fair value of $382.1. Customer relationships have an estimated fair value of $287.8 and will be amortized over their estimated useful life of 23 years. Trade names and trademarks have an estimated fair value of $92.6. Since we intend to use these for the foreseeable future, they are classified as indefinite-lived intangible assets.

Consolidated Actual and Unaudited Pro forma Information

For the year ended 30 September 2012, sales and net income attributable to Air Products included in our consolidated income statementsreflects Indura S.A.sales of $140.0 and net loss of $7.6. Indura's net loss includes a non-cash charge of $14.1 related to a Chilean tax rate change.

The unaudited pro forma results on a continuing operations basis presented below include the effects of the Indura S.A. acquisition as if it had occurred as of 1 October 2010.

		Pro forma
Year Ended 30 September		2012		2011
Sales	$	9,952.3	$	10,144.2
Net income		1,039.0		1,181.9
Net income attributable to Air Products		1,008.6		1,137.5
Basic Earnings per Common Share attributable to Air Products		4.78		5.34
Diluted Earnings per Common Share attributable to Air Products		4.70		5.23

The unaudited pro forma results are based on historical results of operations, adjusted for the allocation of purchase price and other acquisition accounting adjustments, and are not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been completed on 1 October 2010.

The unaudited pro forma results do not include any anticipated synergies or other expected benefits of the acquisition.

DA NANOMATERIALS LLC

On 29 February 2012, we entered into a definitive agreement with E.I. DuPont de Nemours and Co., Inc. to acquire their 50% interest in our joint venture, DuPont Air Products NanoMaterials LLC (DA NanoMaterials). DA NanoMaterials' revenues for calendar year 2011 were approximately $90.

The acquisition closed on 2 April 2012 for $158 ($147 net of cash acquired of $11), and was accounted for as a business combination. Beginning in the third quarter of 2012, the results of DA NanoMaterials were consolidated within our Electronics and Performance Materials business segment. The allocation of the purchase price to the assets acquired was based on their fair values as of the acquisition date, with the amounts exceeding the fair value recorded as goodwill. The allocation included plant and equipment of $26, identified intangibles of $100, goodwill of $125 (of which $50 is deductible for tax purposes), and other net assets of $27. The identified intangibles primarily relate to customer relationships and will be amortized over 22 years.

Goodwill, which is assigned to the Electronics and Performance Materials business segment, largely resulted from expected revenue and cost synergies resulting from the business combination. Management expects that revenue synergies will result primarily from the sale of differentiated offerings and cost synergies from combining supply chains and optimization of combined logistics.

Prior to the acquisition date, we accounted for our 50% interest in DA NanoMaterials as an equity-method investment. The acquisition-date fair value of the previously held equity interest was valued at $120 and was determined using a discounted cash flow analysis under the income approach. The income approach required estimating a number of factors, including projected revenue growth, customer attrition rates, profit margin, and discount rate. The year ended 30 September 2012 includes a gain of $85.9 ($54.6 after-tax, or $.25 per share) as a result of revaluing our previously held equity interest to fair market value as of the acquisition date. This gain is reflected on the consolidated income statements as “Gain on previously held equity interest.”

SAGA

In 2010, we entered into agreements that enabled us to acquire 100% of the outstanding shares of the French SAGA group (SAGA), which consists of SAGA, SAGA Medical, and SAGA Technologies. SAGA was an independent industrial gas provider in France. The acquisition of SAGA supports the Merchant Gases segment's integration strategy by enhancing market position in southwest and central France.

Under the terms of these agreements, we purchased 51.47% of the shares of SAGA on 1 March 2010 for €34.5 million or $47.2 ($25.0 net of cash acquired of $22.2) with the remaining shares purchased on 30 November 2010 for the fixed price of €44.8 million ($62.0 ) under a put and call option structure.

The acquisition of SAGA was accounted for as a business combination, and its results of operations were included in our consolidated income statement after 1 March 2010