Strategy & Management

Messer Returns to the Major League

The Linde - Praxair merger is giving the “other” traditional German industrial gases producer a chance to reclaim its heritage

20.11.2018 -

At the dawn of the new millennium, Messer Group, the industrial gases producer founded in Frankfurt in 1898 by Adolf Messer emerged from the break-up of then-chemical giant Hoechst – which had held the majority of its capital – to see some of its assets sold to private equity. Since taking the reins again in 2004, the founding family has worked toward restoring its former strength and stature. Now, as the gases market heads toward its likely final consolidation, the family-owned company is seizing the chance to deepen its footprint. Stefan Messer, CEO and owner, spoke with Michael Reubold, publishing manager of CHEManager International, about how the future could look.

For the venerable company known for many years as Messer Griesheim, closing the gap to the current market leaders has taken some time, but it now looks as if the owner family’s tenacity may be finally paying off.  The anti-trust fallout from the multi-billion-dollar transatlantic merger of current gases heavyweights Linde and Praxair has provided a unique chance to add much more muscle in one fell swoop.

Following the acquisition of substantially all of Linde's US bulk business and its operations in Canada, Brazil, Chile and Colombia – assets worth $1.7 billion in annual sales and EBITDA of $360 million – Germany’s “other” traditional industrial gases player will more than double in size against its current sales total of €1.2 billion. It will also play in the market’s major league again.                         

With the US Federal Trade Commission (FTC) demanding more and more divestments from the would-be merger partners, it looked for a while as if the deal might indeed fail, and Messer’s anticipated new day in the sun might not dawn after all. But now that regulators have accepted all the offered sell-offs, the signs point to “go” for the gases company managed from Bad Soden and Krefeld to wrap up its purchase by year’s end, says CEO Stefan Messer.

Linde assets good basis for growth

In what sounds like an understatement, Messer says the takeover from Linde of 45 air separation plants, 18 carbon dioxide plants, 12 helium filling stations, a hydrogen liquefaction unit and 12 filling and distribution facilities for industrial and specialty gases could provide “a very good basis for further growth.”

To stem the $3.3 billion purchase without taking on massive debt, Messer has established an operating joint venture with private equity investor CVC Capital Partners Fund VII. The Messer Group will contribute West European assets with sales of €334 million to the new company, while CVC will inject an undisclosed cash sum. The remainder of the purchase price is being financed through liabilities taken on by the jv.

Somewhat unusually, as 58% of the joint company’s equity is in the gases group’s hands, the partners will hold equal voting rights. As Stefan Messer explains, this is part of a strategy to assure that the core group can grow organically, especially in Asia, where it is currently engaged “in a number of projects.” As the new assets in the Americas will need to be consolidated and operations tightened, “we can’t apply the same strategy to the two diverse parts of the business.”

How long the separate management structure will continue is uncertain. The Messer chief notes that the partners have different priorities. CVC will want to exit with a profit in four or five years, at which point Messer Group would like to incorporate the new activities. This will require strict cost control, however. If debt cannot be reduced quickly enough for it to take over all assets when CVC is ready to exit, alternatives could be creating a family holding or going public, both of which the family does not favor.

New geographical mix going forward

Factoring in the add-ons, the rejuvenated gases producer will have a somewhat different geographical mix going forward, compared to some of its earlier incarnations. Since regaining control, the family owners have concentrated primarily on Europe, which now accounts for 61% of business. If the new Linde assets were included in the tally, the split would be fairly even between Europe and North America, though Messer says it is yet too early to know if any of the assets added may later be subtracted.

In the recent past, the German company has been keenly eyeing Asia, where China now accounts for 36% of its global business.  The remainder of its Asian activities, concentrated largely in Vietnam, add up to 3%. The horizon is wide, however. In Thailand, Malaysia, Indonesia – ASEAN countries where Messer was active while still part of Hoechst – potential projects beckon.

Before its post-millennial downsizing, Germany’s second largest player accounted for some 5% of the global industrial gases market. In future, the needle could move back closer to 3-4%, Messer calculates. More important, he says, “is that we see sustainable growth in certain regions and earn enough to support that growth.”

In particular in its land of origin, where in the past it had to divest major holdings to Air Liquide, the company sees itself as now underrepresented.  Recently, however, it has picked up new business building air separation plants. Two are in place in Salzgitter and Siegen, a third going up in Speyer. Messer has also opened a new technical development center at Krefeld, where it is testing new processes for supplying the food and chemical industries. Knowledge gleaned here can later be applied to activities in other countries and regions.

The food sector is especially enticing for gases producers.  Here, Messer calculates good chances for growth, especially in the US, where it can benefit from Linde’s already strong presence. Another market trend is nitrogen as a refrigerant or as an inert gas.  The electronics industry continues to be a good customer for high purity gases, but also for nitrous oxide, for which  the German company will soon widen its Asian capacity.  For carbon dioxide, applications in the beverage, environmental and medical technology sectors are seen to hold promise.


Messer Group GmbH

Messer-Platz 1
65843 Bad Soden/Taunus

+49 6196 7760-0
+49 6196 7760-501