German industrial gases group Linde and U.S. rival Praxair have ended talks to create a $60-billion-plus market leader, they said on Monday, after failing to agree where to locate key activities and who would run the business.
Although the logic of the deal was clear, the talks foundered on where the combined firm would have its headquarters and research and development, and who would occupy the main management roles, three sources familiar with the matter said.
One of the sources said the two chief executives had on Sunday “agreed to disagree” and dropped the plan to create a rare merger of equals.
Linde shares had dropped 7.8 percent to 137.25 euros by 1040 GMT, below the price at which they were trading just before news of the talks emerged last month.
“While the strategic rationale of a merger has been principally confirmed, discussions about details, specifically about governance aspects, did not result in a mutual understanding,” Linde said in a statement.
A deal would have accelerated consolidation sweeping the industrial gas sector, where slower economic growth has weakened demand in the manufacturing, metals and energy sectors and put pressure on smaller players.
A Linde-Praxair deal would have had a good chance of passing anti-trust regulation in the United States, analysts believed, with Linde’s strong position in healthcare complemented by Praxair’s focus on industry.
Munich-based Linde supplies gases to hospitals and patients with respiratory disorders in North America, as well as industrial gases worldwide, while Danbury, Connecticut-based Praxair focuses on industrial on-site production.
Bankers said they did not immediately see another rival targeting Linde, already the global leader by revenue, and with a market value of about 28 billion euros ($31 billion).
France’s Air Liquide is still digesting its $13 billion acquisition of U.S. rival Airgas, which it completed in May, while a quick move by U.S. peer Air Products would be seen by Linde as too opportunistic, one banker said.
Both Praxair and Linde are seeing their sales decline, but are not seen as desperately needing to merge with a rival.
Analyst Peter Spengler of Germany’s DZ Bank, which rates Linde stock a “sell”, welcomed the deal’s collapse.
“We were not convinced about that the merger would be beneficial for Linde shareholders,” he wrote in a note. There is no need for a merger at this large scale in our view.”
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