Path to Linde-Praxair Merger Still Rocky

30.10.2017 -

The rocky road to completion of the merger between Germany’s Linde and Praxair of the US just got a little rockier, it appears, but executives of the two industrial gases giants have a chance to smooth it again at a top-level meeting on Nov. 6. Chief topic of discussion will be remarks made by Praxair’s chief financial officer, Matt White, in a private meeting with investors.

After Linde on Oct. 23 lowered its shareholders’ minimum tender requirement from 75% by Oct. 24 to 60%, acceptance of the deal shot up to 68% up to Oct. 27. Analysts then forecast that, even if tenders could later be withdrawn, virtually nothing stood in the way of wrapping up the transaction in the second half of 2018.

At the end of last week, however, White further dampened the already sagging enthusiasm for the business combination on the European side of the Atlantic. At the investors gathering, the executive hinted that some Linde businesses could be put up for sale post-merger.

Up for grabs, White said, could be at least part of Linde’s medical gases portfolio, trading in the US under the Lincare label, as well as its traditional engineering and plant construction business, based in Munich.

The idea that Linde businesses could be dismantled does not sit well with either shareholders or the workforce. The former group, led by investors’ association DSW, have  felt that the tender price is too low. Employee representatives – who earlier sought to torpedo the merger – have long been skeptical that they will get a fair shake under the future US leadership.

Although the new company will be called Linde and based in Ireland, it will be managed from Praxair’s headquarters in Danbury, Connecticut, and be governed by US labor laws, which are generally weaker than in western Europe.

While Lincare has shown softness in the US, in presenting financial results for the third quarter Linde CEO Aldo Belloni told journalists that the engineering arm (which specializes in large petrochemical facilities and traditionally has had good connections in oil-rich Middle East countries) could hold its own under the changed circumstances.  At the same time, he acknowledged that all of the combined businesses will be subjected to a review.

The transaction is still must be approved by antitrust authorities in several key markets. Linde and Praxair are expected to have to divest activities worth around €2.7 billion in annual sales.