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Geography plays role in fate of two deals

Linde-Praxair merger is off, PotashCorp-Agrium merger is on, in part due to location issues

by Michael McCoy
September 14, 2016 | A version of this story appeared in Volume 94, Issue 37

Credit: Linde
Linde’s insistence on keeping certain jobs at its Munich headquarters apparently helped scuttle its merger with Praxair.
A photo of Linde’s headquarters in Munich.
Credit: Linde
Linde’s insistence on keeping certain jobs at its Munich headquarters apparently helped scuttle its merger with Praxair.

The chemical industry is as global as they come, but location still matters. An international combination of industrial gases companies was just called off, in part because of disagreement about the location of certain jobs. Meanwhile, a merger of two fertilizer companies is going ahead, eased by the fact that the firms are both Canadian.

The gases merger, first revealed last month, was to combine U.S.-based Praxair and Germany’s Linde. The new company would have had a global industrial gases market share of about 40% and annual sales of close to $28 billion, making it by far the world’s largest gases firm.

At the time, outside analysts said obtaining antitrust clearances to create the company would present hurdles. But in the end it was questions about who would do what and where that killed the deal.

“While the strategic rationale of a merger has been principally confirmed, discussions about details, specifically about governance aspects, did not result in a mutual understanding,” Linde said in a statement. Published reports say the two firms couldn’t agree on where to house R&D and other functions. Citing the deal’s failure, Linde CEO Wolfgang Büchele said he will step down when his contract ends in April 2017.

Talks are going more smoothly in Canada, where Potash Corp. of Saskatchewan and Agrium have announced an agreement to combine into what they say will be the world’s largest crop nutrient company with annual sales of about $21 billion.

Past deals involving PotashCorp failed in large part because of location. A 2010 hostile takeover attempt by the mining giant BHP Billiton was quashed by the Canadian industry ministry, which argued that the acquisition would not be a net benefit to Canada. Likewise, Germany’s K+S rejected PotashCorp’s 2015 takeover offer in part because it didn’t guarantee protection for the firm’s German workers.

The all-Canadian merger has no such hitches. PotashCorp and Agrium say they will maintain corporate offices in their respective headquarters cities of Saskatoon, Saskatchewan, and Calgary, Alberta. “Our merger creates a new, premier Canadian-headquartered company,” says PotashCorp CEO Jochen Tilk.



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