A few months ago I wrote about a company called Airgas Refrigerants. Every time I see that company’s name I get a little nostalgic as it brings me back to my days when I was buyer and was in charge of purchasing R-134a refrigerant for my former company. Back then, and still today, Airgas was a pleasure to work with and always made things easy, which I am a big fan of. If you make things easy then they keep coming back. It’s a basic business principle but it seems so many people forget it.
In that article that I wrote in August we found out that Hudson Technologies was acquiring Airgas Refrigerants. The total purchase cost was approximately two-hundred and twenty million dollars. Some of this was paid up front while the remaining portion of one-hundred and eighty-five million dollars was financed.
Hudson Technologies is one of the nations leading refrigerant distributors and reclaimers. In the second quarter of this year they brought in fifty-two million dollars in revenue. If we do an estimated annualization of that we are looking at two-hundred and eight million dollars in revenue. Over the past few years they have been growing aggressively in the refrigeration distribution and reclamation markets across the country. The only other company that rivals Hudson at this point is A-Gas Americas.
Airgas Refrigerants is a national refrigerant distributor as well as a Environmental Protection Agency certified refrigerant reclaimer. By adding Airgas to the Hudson Technologies portfolio Hudson puts itself into position to become an even stronger refrigerant distributor and reclaimer along with giving them that extra edge when competing against A-Gas Americas.
The Why?
Now, I’m not Hudson Technologies but I believe that a big driving force in this acquisition was the upcoming 2020 phase out date of R-22. We all know that R-22’s phase out began in 2010 with no new machines or units able to be imported or manufactured here in the United States. In 2015 the production and import quotas of R-22 was restricted. Now, finally in 2020 all production and importing of R-22 will be completely banned. The only way and I mean ONLY way to purchase R-22 refrigerant will be through recycle or reclamation facilities.
What that means is the price of R-22 will shoot up even higher than it already is. Along with that two companies have been gobbling up all of the refrigerant reclaimers out there. Hudson Technologies is one of them and the other is A-Gas Americas. If all goes according to plan these two companies will make a killing in the 2020 and within the first years after. There will be very little competition left when it comes to R-22 sales. These two companies will have a monopoly of sorts, at least for a short while.
The R-22 phase out is a delicate balancing act. By 2020 the R-22 machines will be ten years old at a minimum. Most of them will probably be older then that. So, while these machines will be breaking or needing repairs already I can imagine they will need even more repairs three years from now in 2020. Here’s the thing though eventually these repairs will get to be so expensive that homeowners and building owners will be forced to go a newer R-410A unit. There is going to be a window, a very small window, where people still want to repair R-22 units and do not want to replace with R-410A, but since R-22 is no longer produced and recycled all of the business will go to Hudson or A-Gas. It’s a gamble but there is a very sweet reward if it works out right.
Conclusion
This will definitely be an interesting series of events to watch when the 2020 deadline hits. Will the demand of R-22 rise and these two companies make a lot of money? Or, will their gamble fall through as R-22 demand dives downward and the need for reclamation all but vanishes?
Lastly, I should note here that Airgas itself did not sell to Hudson Technologies. Only the subsidiary known as Airgas Refrigerants is changing hands.