German industrial-gas giant Linde ends merger talks with US rival Praxair

13 Sep 2016

German industrial-gas giant Linde AG yesterday ended merger talks with its US rival Praxair Inc to create the world's largest industrial-gas supplier with a market cap of more than $60 billion and annual sales of $26.4 billion.

Post announcement, Linde shares fell 7.9 per cent at Frankfurt, giving it a market cap of €25.5 billion ($28.6 billion), while Praxair fell by 2.6 per cent to $117.41 in New York.

Linde, based in Munich, said that with the advice of shareholder representatives in its supervisory board and the CEO, they have asked the management and supervisory board to terminate preliminary talks with Praxair on a potential merger.

Giving reasons for calling off the merger talks, Linde said ''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.''

Several media reports suggest that both companies had agreed to broad terms of the deal like having the headquarters for the combined entity in Europe, and the operational centre in Praxair's hometown in Connecticut.

But Linde wanted to have certain operations to be based at its Munich headquarters since it feared that certain key management jobs would be cut.

The news comes amid a consolidation in an industry hit by declining energy prices and sluggish economic growth.

In December 2015, Linde agreed to buy respiratory health-care specialist American HomePatient Inc in order to expand a medical-gas business in the US, and in May, France's Air Liquide SA acquired Airgas Inc for about $10 billion, while in April, Praxair, acquired five small industrial gas businesses, which had combined 2015 annual sales of more $40 million.

Founded in 1879, in Munich, Germany by Professor Doctor Carl von Linde, Linde became the world's largest industrial gas company by market share as well as revenue after it acquired its UK-based rival the BOC Group in 2006 for $13.9 billion.

Linde also designs and builds large-scale chemical plants for the production of industrial gases, including oxygen, nitrogen, argon, hydrogen and carbon monoxide, as well as large plants for processing LPG and the manufacture of olefins.

The company, which is listed on all the German stock exchanges and also in Zürich, has over 600 affiliated companies in more than 100 countries, with customers in the industrial, retail, trade, science, research and public sectors.

It holds 22 per cent of the world's market share in industrial gases followed by Air Liquide with 21 per cent, Praxair with 13 per cent, Air Products & Chemicals with 10 per cent, Taiyo Nippon Sanso Corporation with 4 per cent, and Messer Group with 1 per cent.

Praxair is the largest industrial gases company in North and South America, and the third-largest worldwide by revenue.

It was the first company in North America to commercialise separated oxygen, and the first to introduce the distribution system for liquid gas in 1917.

A merger between the two giants would have attracted scrutiny from regulators in North America and the European Union.