Linde and Praxair have agreed to the outline of a deal that will combine the companies in a merger of equals under Linde’s name.
Current Linde and Praxair shareholders will each hold about 50% of the merged company under the terms of the deal. Linde and Praxair confirmed that they had resumed negotiations on a merger in late November after deal talks collapsed earlier this year. The deal may take a while to close, pending a final agreement and regulatory approvals. Praxair indicated in a letter to employees that regulatory reviews may not be completed until the middle of 2018.
The combination would allow Linde to retake the position of largest global producer of industrial gases with combined pro forma revenue of approximately $30 billion (€28 billion). It would take the lead back from Air Liquide, which has pro forma annual revenue of about $22 billion and edged ahead of Linde following Air Liquide’s acquisition of Airgas earlier this year. The combined Linde-Praxair would have a market value in excess of $65 billion.
Praxair chairman and CEO Steve Angel will become CEO of the combined company. Wolfgang Reitzle, the current chairman of Linde’s supervisory board, will be chairman. The holding company would be domiciled in a neutral member state of the European Economic Area with the CEO based at Praxair’s Danbury, Connecticut, headquarters. Corporate functions would be split between Danbury and Munich, Germany, Linde’s current headquarters. “The strategic combination between Linde and Praxair would leverage the complementary strengths of each across a larger global footprint and create a more resilient portfolio with increased exposure to long-term macro growth trends,” says Angel. “We consider this to be a true strategic merger as it brings together the capabilities, talented people, and best-in-class processes of both companies.”
Praxair said it is confident it will receive required regulatory approvals but noted the review timeline may extend into the middle of 2018. “Our goal is to retain as much value as legally possible from this merger,” Praxair told employees. “We expect the regulatory process to conclude early to mid-2018. The need for, and extent of, any required divestitures will not be known until the end of this process.”
Linde shareholders would receive 1.54 shares in the new company for each Linde share exchange, and Praxair shareholders would receive 1 share for each Praxair share.
Linde CEO Aldo Belloni said in a letter to employees announcing the agreement that Linde’s engineering division would be carved out as a wholly-owned subsidiary. “This will give us the opportunity to secure both our Engineering business as the preferred supplier for Linde Gas, and greater visibility of the global engineering brand to all customers in the market,” Belloni said.
Linde will continue with a €370-million cost-savings program announced in October. “The global environment for our industry will continue to be challenging and fiercely competitive, so it is imperative that we get our operations in the best possible shape to move forward,” Belloni told employees. “Praxair is renowned for its impressive efficiency, and it is important in a merger of equals that we mirror these effective and dynamic operations.”
Linde and Praxair say they expect to complete internal approvals and execute a definitive business combination agreement “in the coming months.” The final agreement remains subject to due diligence, further negotiations, and board approvals of Linde and Praxair. The final transaction remains subject to shareholder and regulatory approvals, as well as other customary closing conditions. “Linde and Praxair are confident that any required regulatory approvals, including any required divestitures, could be obtained in a timely manner following the execution of a definitive business combination agreement,” the companies say in a joint statement.
Linde and Praxair share a founder in Carl von Linde, who founded Linde AG in Wiesbaden, Germany in 1879. Von Linde founded what would become Praxair as Linde Air Products in Cleveland, Ohio in 1907. Linde built the first US oxygen plant in Buffalo, New York in 1907. Union Carbide acquired control of the US Linde operations in 1917 and continued to operate the business under the Linde name in North America for decades. Carbide spun off its industrial gases operations as Praxair in 1992. Praxair sold the North American rights to the Linde name and trademark to Linde AG for $60 million in 1996.
By Robert Westervelt
Source: Chemical Week
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