The industrial gases behemoths Praxair and Linde say they are in preliminary talks to merge. The combined company would have a global market share of about 40% and annual sales of close to $28 billion, making it by far the world’s largest gases firm.
The deal would be the second recent consolidation in industrial gases, after Air Liquide’s purchase of Airgas in May. “These discussions are ongoing, and there can be no assurance that they will result in a transaction, or on what terms any transaction may occur,” Praxair says.
Praxair had sales last year of $10.8 billion, earnings of $1.7 billion, and 27,000 employees. Linde had overall sales, including its engineering business, of $20.3 billion, $1.4 billion in earnings, and 65,000 staffers. The main business of both firms is separating air into oxygen, nitrogen, and argon for use by industry.
Both companies have a strong presence in North America, South America, and Europe. Regulatory authorities could sink the deal if they required the two firms to shed a substantial share of businesses in these regions.
“Praxair and Linde will have thought about the antitrust issues and will be developing a solution that would be acceptable. So a deal is doable, but it will be a challenge,” says John Raquet, managing director of Spiritus Consulting, an England-based industrial gases consulting firm. “It is highly likely that both firms will already have spoken to regulatory authorities in Europe and the U.S.”
Antitrust authorities closely watch the oligopolistic industrial gas business. The U.S. required major concessions from Air Liquide in its $13 billion acquisition of Airgas. In 2000, an attempt by Air Liquide and Air Products to acquire and split up BOC was undone by antitrust requirements.
In a note to investors, Jefferies stock analyst Laurence Alexander gives the deal a more than 70% chance of taking place. “It is not implausible,” he states.
It is not known whether Linde would retain its huge engineering business if it merged with Praxair. In a bid to keep costs low, Praxair outsources construction and engineering projects.