When hedging becomes speculation

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Firms Involved

  • Air Products and Chemical
  • BOC Group

Year of the event


Description of the case

In July 1999, US gas and chemical company Air Products & Chemicals announced a £7.2bn bid for UK-based BOC Group. Six previous attempts to take over BOC had failed, and in May 2000 the deal collapsed as Air Products failed to meet a deadline with the FTC (Federal Trade Commission). However, Air Products had entered into forward contracts to hedge the transaction, and was forced to close its positions in May 2000, as the pound was at an all-time low, resulting in a pre-tax loss of $595m.[1][2].


  • The choice of instruments is essential to a hedging program. IF the event is uncertain or has optionality embedded to it, then forwards can prove very hurtful.


  1. The Wall Street Journal, Air Products Takes Beating After Failed Deal for BOC
  2. ICIS, Hedging Against Risk Takes Spotlight in Volatile Times