Linde, Praxair agree terms of $65 billion deal to create gas giant

German industrial gases maker Linde and its US competitor Praxair on Tuesday said they had agreed the terms of a proposed $65-billion "merger of equals" to create a global giant in the sector. The agreement, which paves the way for the deal to be finalised, comes after a previous attempt at a tie-up failed in September amid reports of executive infighting over key positions and their locations.
"Linde and Praxair today announced that the companies intend to combine in a merger of equals under a new holding company," the two firms said in a joint statement. "Under the Linde brand, we want to combine our companies' business and technology capabilities and form a global industrial gas leader," Linde CEO Aldo Belloni said.
By joining forces, the two groups would overtake Linde's historic French rival Air Liquide as the world number one industrial gas supplier, with combined annual revenues of more than $30 billion (29 billion euros). In the statement, Linde and Praxair estimated that the new combined company would have a "market value in excess of $65 billion". The merger would lead to annual savings of around $1 billion, they added, "driven by scale benefits, cost savings and efficiency improvements".
"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," said Praxair chairman and chief executive Steve Angel. Analysts have warned that the merger could face close regulatory scrutiny, as it would further shrink the number of large players in the market following Air Liquide's take-over of US-based Airgas in May.
The consolidations come at a time when industrial gas firms, which supply products for use in medicine and in industrial processes in the chemical, electronic,energy and agri-food industries, are grappling with sluggish demand and low prices. Under the all-stock transaction, shareholders in Munich-based Linde and Connecticut-based Praxair would each own approximately 50 percent of the new combined company, which would carry the Linde brand name.
The new company would be domiciled in a "neutral" European country, the two firms said, in an apparent compromise to overcome a key stumbling block that had surfaced in the initial merger talks. Corporate functions meanwhile would be "appropriately split" between Danbury, Connecticut and Munich in Germany, they added. If the deal goes ahead, Linde's supervisory board chairman Wolfgang Reitzle would become chairman of the new company's board, while Praxair's Angel would become CEO and member of the board of directors.
Executive personnel and the site of the merged group's headquarters were vexed questions that helped scupper the deal the first time around, a source familiar with the discussions told AFP at the time. Linde's chief financial officer Georg Denoke, who reportedly opposed the tie-up, stepped down after it fell through. The merger talks resumed in early December after Linde said it had received a fresh proposal from Praxair.
Both parties stressed that the proposed merger remained subject to internal approvals and that they hoped to have a definitive agreement "in the coming months". The deal will then still require approval from shareholders and regulators. The new combined company will be listed on the New York and the Frankfurt stock exchanges. Following the announcement, Linde shares fell by 1.1 percent to 161.75 in afternoon trading in Frankfurt, underperforming the Dax index of leading German firms which was up 0.24 percent.