Linde and Praxair in Non-binding Merger Pact

21.12.2016 -

Industrial gases producers Linde of Germany and Praxair of the US have formally agreed to merge in an all-stock transaction, at present still non-binding. The new transatlantic giant trading under the name Linde is planned to be listed on stock exchanges in New York, USA, and Frankfurt, Germany.

The new company that will be owned to 50% by each of the two still separate entities will leap-frog over another transatlantic player, the recently merged Air Liquide-Airgas, to become the global market’s number one player, just as Linde replaced Air Liquide at the top when it bought BOC in 2007. Combined pro forma revenues would total $30 billion, compared to $22 billion for the enlarged Air Liquide.

As expected, current Praxair chairman and CEO Steve Angel has been chosen as CEO of the new Linde, with the German company’s supervisory board chair, Wolfgang Reitzle, serving as board chairman. For a pre-merger interim period, former managing board member Aldo Belloni will act as Linde CEO. Earlier this month, Belloni was appointed to a term of not more than two years after the resignation of then-CEO Wolfgang Büchele.

The two partners are nearly equal in enterprise value, Linde with a market capitalization of around $30 billion, Praxair with $34 billion. To complete the deal, a new holding company will be set up and launch a public exchange. Linde shareholders are due to receive 1.54 shares for each of their existing shares, with Praxair shareholders receiving one share for each of their existing shares.

A location for the holding has not been disclosed, but the companies said it would be domiciled in a neutral member state of the European Economic Area, with the CEO based at Praxair’s US headquarters. Corporate functions would be split between Europe and the US. Earlier, London was said to be favored as the holding’s headquarters, with other tax-friendly countries such as The Netherlands and Ireland under discussion.

In a statement announcing the agreement, Linde and Praxair said the new company that would leverage the German player’s strengths in technology with the US gases producer’s operational excellence should be able to realize synergies of around $1 billion, thanks to strong, complementary positions in key geographies.

CEO-designate Angel said the combined strategic strengths and a larger global footprint, along with a more diverse and balanced portfolio, would enable the development and delivery of more innovative products and services.

“Beyond the strategic fit, the compelling, value-creating combination would achieve a robust balance sheet and cash flow, and generate financial flexibility to invest in our future,” added Belloni. 

Linde and Praxair sad they expect to complete internal approvals and execute a definitive business combination agreement “in the coming months.” The final agreement will be subject to due diligence, further negotiations and board approvals.  It also will be subject to shareholder and regulatory approvals, along with other customary closing conditions.

The merger partners said they are confident that regulatory approvals, including any required divestitures, can be obtained in a timely manner after a definitive business combination agreement is reached. The agreement would require approval by both shareholders’ meetings. In Linde’s case, a 75% majority of the outstanding shares would have to agree.