Chart Industries: Howden’s Integration Off to Fast Start

Chart Industries’ GTLS deal to acquire Howden closed March 17. Since then, Chart has announced several early successes on the commercial and cost synergies front, including the recent announcement of its expansion of the Hydrexia partnership. The Hydrexia partnership, originally with Howden, now includes Chart products and is specifically focused on delivering hydrogen refueling stations in Australia, New Zealand and Southeast Asia. The partnership, which has delivered over 40 stations already, now also benefits from Chart’s experience in obtaining regional hydrogen certifications for equipment. We think this is a good example of the positive outcomes of the deal for a newly expanded Chart. The expanded partnership is not material enough to move our $165 per share fair value estimate or narrow moat rating for Chart.

As part of the Howden deal, Chart announced that it is aiming to achieve $350 million in sales synergies and $250 million in cost synergies by the third year of the deal, or 2026. Near-term estimates are $150 million in sales synergies and $175 million in cost synergies within 12 months of the deal closing, or March 2024. Based on what we are seeing so far, we think there’s a high likelihood that they are achieved. By our count, Chart has over 50 detailed initiatives across its business designed to achieve these targets, suggesting a highly granular plan for success that also allows for not all initiatives to be realized but the overall goals to still be met.

Chart has already realized $31.5 million in cost synergies (18% of its near-term target) mainly by insourcing Howden compressors on Chart projects in the backlog, eliminating executives and the private equity management fee. On the sales side, it has over $7 million (about 5% of its near-term target) in synergies, mainly due to including Howden compression products in hydrogen projects, but also via expanding partnerships like the Hydrexia one to include both Chart and Howden products.