Air Liquide Brings Messer into the Fold

Compared with its attempt to buy BOC five years ago with then-partner Air Products & Chemicals, Air Liquide's $3.2 billion purchase of Messer Griesheim's gases business in the U.S., U.K., and Germany was a snap.

The failed BOC deal taught Air Liquide's managers that "we needed to be more aware of legal issues and how regulators defined markets and looked at antitrust issues," said Benoît Potier, chairman of Air Liquide. Talking to reporters earlier this month at a press conference in New York City with Pierre Dufour, CEO of Air Liquide America, Potier said that this time his firm carefully prepared its approach to regulatory approval by the European Commission and the U.S. Federal Trade Commission.

Even before making its formal offer to buy 70% of Messer in late January, "we spent a few months talking to U.S. and European regulators about the deal," Potier said. "When we launched our bid, both the European Commission and FTC knew what it was all about."

Air Liquide was also better prepared to answer the barrage of questions it had come to expect from its last experience with regulators. Potier said the firm lined up marketing experts, economists, and a host of consultants to answer regulators' questions. If 40 questions came in on any one day during the approval process, "we could answer in less than 24 hours," he said.

BECAUSE IT better understood the regulatory process, Air Liquide won the approvals it needed to buy the Messer businesses in fewer than four months; the deal closed in May. In 1999, in contrast, when Air Liquide partnered with Air Products to divvy up BOC in an $11.6 billion joint bid, European regulators approved, but 10 months of negotiation with FTC failed to win a nod.

The Messer transaction was only one- fourth the size of the BOC deal, Potier pointed out. And since it didn't involve two partners who were dismantling a competitor, it was also less complex. Nevertheless, regulators were concerned about preserving global competition, Potier said.

In the next five months, Air Liquide must divest assets representing about 23% of Messer's $1.2 billion in sales--18% of its U.S. sales and 30% of its German sales. No assets have to be divested in the U.K., where Air Liquide had only a "small presence" before, Potier said.

An additional $300 million in Messer sales will raise Air Liquide's U.S. sales to about $2 billion. "We are now the third largest gas company in the U.S., after number one Praxair and number two Air Products," Dufour explained. Although Air Liquide must sell off almost a fifth of Messer's U.S. assets, Dufour doesn't consider the requirement onerous, noting that the deal brings a "strategic" presence in the eastern U.S., where the company wasn't especially strong before.

In Germany, the acquisition will more than double Air Liquide's sales, after divestitures, to $1.1 billion, giving it a 40% share of the market. Some Messer employees remain with Messer, which is now pursuing a strategy of growth in Eastern Europe, Asia, and South America. But Potier said some reductions in force will come in Germany as Air Liquide adjusts employment in line with business needs.

Next on the agenda, Potier said, is reducing debt of about $5 billion and looking for new opportunities to grow. Because it's the world's largest gas company, Potier admitted that regulators will limit his firm's growth through acquisition.

Yet, with a twinkle in his eye, he pointed to the huge oxygen contracts at major natural gas-to-liquids projects proposed in the Middle East as a growth opportunity that antitrust regulators don't control. If the projects are all built, industrial gases firms will vie to build 100,000 metric tons per day of capacity to liquefy natural gas. That is more capacity than now exists in Europe, he said.