Linde Plans Share Sale to Fund $4.6 Billion Lincare Deal

03.07.2012 -

German industrial gas firm Linde plans to raise up to €1.5 billion ($1.9 billion) from selling new shares to help fund its purchase of Lincare Holdings, which will put it ahead of Air Liquide in the medical gas market.

Linde has agreed to pay $4.6 billion for the Florida-based provider of oxygen and respiratory therapy services to patients in the home, boosting its position in a market benefiting from cost cuts by hospitals and an ageing population.

European industrial gas suppliers are keen to make inroads into the medical gases business in the United States, where the so-called homecare market is growing 6-9% annually.

Linde Chief Executive Wolfgang Reitzle said on Monday the acquisition made the company the world leader in the medical gas market and gave it access to the U.S. homecare oxygen and respiratory business by buying the market leader, which has around 28% share of a highly fragmented industry.

"This was a unique opportunity for us which you can only label as a historic move because it is more than doubling our healthcare business," Reitzle told reporters.

Linde has already begun growing its healthcare division, having bought the European homecare operations of U.S. gas supplier Air Products early this year for €590 million ($748.74 million).

That made the German supplier a strong number two in the medical homecare business after Air Liquide, also the world's top industrial gas supplier. Air Liquide announced last month it was in talks to acquire a controlling stake in the French business of LVL Medical for €316 million.

Linde's main industrial customers are in the steel and chemical sectors and it also supplies gases used to process solar cells and make LCD flat screens.

Linde will finance the deal with a $4.5 billion bridge loan underwritten by JP Morgan and Deutsche Bank. The loan will be refinanced by an equity issue of up to €1.5 billion and debt capital market transactions, Linde said. Its executives declined to give further details.

Eyes more acquisitions

Reitzle said Lincare had been on Linde's radar for years. "When the moment comes we are prepared," he said.

An investment banker familiar with the situation told Reuters Linde had been eyeing Lincare since 2008 and that private equity firm Blackstone had also looked at the U.S. company.

Analysts said the $41.50 per share acquisition price, which represents a premium of 64% over Lincare's share price of $25.26 on June 26, was higher than the $3.4 billion mooted in press reports last week.

Credit Suisse analysts said the price equated to 9.1 times Lincare's estimated 2013 EBITDA (core earnings). Rival Air Liquide's offer to buy the French operations of LVL Medical, announced last month, was at 10.5 times EV/EBITDA, according to Societe Generale estimates.

Chief Financial Officer Georg Denoke told reporters Linde was not under time pressure to launch the capital hike.

Asked whether Linde would make any further acquisitions in other fields and regions, Reitzle replied: "This is exactly why we are planning for a capital increase." He said the move would also give it enough fire power for any bolt-on acquisitions in other core businesses and in emerging countries.

The investment banker said the capital hike could be launched immediately after the closing of the deal, which was planned in the third quarter of this year, but that market conditions would also play a role in the timing.

Linde, whose last major takeover was that of Britain's BOC in 2006 for around €12 billion, said it was committed to maintaining its current credit ratings of A from Standard & Poor's and A3 from Moody's.

Linde was advised by Morgan Stanley and Perella Weinberg. JP Morgan advised Lincare.