On the 20th January 2004, Air Liquide announced that they had signed an agreement with Messer Griesheim to acquire Messer’s industrial gas operations in the UK, US and Germany for €2.7 billion.

Simultaneously, the Messer family, through their holding company Messer Industrie GmbH (MIG) announced that they would acquire the remaining shares in Messer Griesheim, formally owned by Allianz Capital Partners and private equity funds managed by Goldman Sachs.

For the acquisition to go ahead both Air Liquide and MIG had to fulfil a number of conditions set by the anti-trust authorities in the US and Europe. Air Liquide, had to carry out a series of divestitures of around 23%, and MIG had to complete its acquisition of the remaining Messer Griesheim group which both company’s achieved.

The total consideration amounted to €2,680 million including assumed debt, for acquired sales of €1,040 million (2003 estimates), however divestitures have reduced this amount by €230m.

Chairman of Air Liquide’s Management
Board Benoît Potier///Photo courtesy of Air Liquide

Commenting on the acquisition, Benoît Potier, Chairman of Air Liquide’s Management Board, said of the company’s strategy: “Acquiring Messer’s industrial gas operations in Germany, the United Kingdom and the United States, is an exceptional opportunity for us, given the strong competence of its people, its complementary geographic positions and the quality of Messer’s assets.

Growing in Germany – at the very heart of an expanding European market – will allow us to better serve and accompany our clients, giving them wider access to our products and services.”

In the U.S., the acquisition will enable us to enhance our national coverage and strengthen our competitiveness.
In addition, this proposed transaction allows us to establish a targeted presence in the United Kingdom.

The economic terms of this acquisition are in line with our objectives and preserve our strong financial structure due to the quality of the operations acquired, the anticipated efficiency synergies and the strength of our current balance sheet.

This acquisition reflects our ambition to grow and represents a major step forward for the Group.”

From the Messer point of view, Stephan Messer, CEO of MIG and grandson of Messer Griesheim’s founder said “Closing of the transaction is a very important milestone for the new Messer Group in its strategy to focus on growth markets in Eastern Europe and China.”

Figure 1///Image courtesy of Spiritus Consulting

Figure 2///

Figure 1 shows the market share of the retail market for industrial gases in the Eurozone on a 2003 basis. Figure 2 illustrates the change in ownership of Messer Germany and Messer UK to Air Liquide and shows the impact that the acquisition had following the completion and disposals required by the European Commission. Together theses charts show that Air Liquide gained a five percent market share and represents 33 percent of the total Eurozone market.

Commenting on Praxair’s expansion in Europe, Praxair’s Chairman and CEO, Dennis Reilley said, \\$quot;This acquisition fits well with our business strategy in the German/Benelux region. We are acquiring a high quality business with important global and European customers. In integrating this business, our highly successful European team will bring Praxair's disciplined operating culture and excellent customer service skills to further improve the business and strengthen these important customer relationships.\\$quot;

For the deal to go ahead, the European Commission asked that Air Liquide divest around €200 million of its German based business and acquisitions. This is when Praxair stepped onto the ‘Acquisitions and Consolidations’ board game.

On October 7th 2004, Praxair announced that they had reached an agreement with Air Liquide to purchase its industrial gases and related businesses in Germany for just under €500 million. The package included the southern portion of the Rhine/Ruhr pipeline and the Saar pipeline, plus bulk distribution and packaged gas businesses. Praxair now operates six pipeline systems in Belgium, Germany Spain and Italy.

Dennis Reilley, Praxair’s Chairman and Chief Executive Officer///Photo courtesy of Praxair

As a result of the Messer divestment, the competitive environment in Germany has somewhat changed with one major player exiting to be replaced by two stronger gas companies.

Elsewhere in Europe, Air Liquide gained a 4 per cent share of the UK market when it acquired Messer’s assets. They spent the remainder of 2004 trying to understand how to make the business work in the UK as Messer had always struggled to develop a profitable business in the UK ever since it entered in the mid 80’s.

In the US, the Federal Trade Commission (FTC) had agreed to the acquisition of Messer’s assets by Air Liquide on the condition that they divest 18 percent of the operations, corresponding to sales totalling €55 million. In June, Matheson Tri-Gas Inc. (a subsidiary of Nippon Sanso) acquired part of the bulk (liquid) business of Messer for $155 million dollars. The acquirer, Matheson Tri Gas, is an important player in the industrial gas market in the South of the US. The transaction involved mainly gas and distribution activities, as well as certain on-site contracts in the southern and western parts of the country. In October, Air Liquide announced that it had sold its packaged gas business interests (GT&S, LP). The interest was purchased by an entity controlled by the previous minority owner of GT&S for a sum close to annual sales, which were approximately $80 million dollars in 2003.

///Image courtesy of Matheson Tri Gas

///Photos courtesy of Taiyo Nippon Sanso

Nippon Sanso, owner of Matheson Trigas, also hit the news with its merger with Taiyo Toyo Sanso. The board of directors from both companies reached an agreement on December 18 2003, to implement a merger on an equal footing, in effect from October 1 2004. The name of the new post-merger company was to be called Taiyo Nippon Sanso Corporation (with a new Corporate Image). The newly formed company strengthened Nippon Sanso’s position as the leading company in Japan in the industrial gas market and will have total assets equalling ¥309 billion (approximately US$2.9 billion).

Hiroshi Taguchi, President and CEO///Photo courtesy of Nippon Sanso Corporation

Commenting on the merger, the President and CEO of Nippon Sanso, Hiroshi Taguchi said: “Since Nippon Sanso has long enjoyed positive relations with Taiyo Toyo Sanso through the joint operation of a large number of production companies and other activities, the merger promises to further strengthen our corporate structure and competitive advantage. We aim to contribute to 21st-century industry as the leading company in the Japanese and Asian industrial gases business. Soon after the merger takes place, we plan to integrate the sales, distribution, technology and other divisions in order to streamline business efficiency. We will also be focusing our investments in the areas of research and development, semiconductors, and medical care as we strive to further expand our business and enhance corporate value.”

Back in the US, BOC finally decided what it was going to do with its cylinder business. After years of under performance BOC decided to sell its US packaged gases business to Airgas.

///Image courtesy of BOC

On January 27 2004, the BOC group announced that it would sell its US packaged gas business to Airgas for $200 million in cash. The business generated approximately $240 million in revenues in 2003’s fiscal year. The deal included approximately 120 BOC locations in 21 states involved in distributing packaged gases and welding equipment. The deal did however exclude helium and hydrogen delivered in tube trailers or in liquid form, bulk medical gases and bulk gases supplied to its distributors. These elements, along with the Canadian packaged gases business remained part of BOC’s Industrial and Special Products business in North America.

Tony Isaac, chief executive of BOC, said: “We will continue to invest in markets where we see superior opportunities for profitable growth in line with our strategy. We have worked hard to improve the performance of our packaged gases business in the United States, and we believe the proposed sale to Airgas represents the best long-term outcome for our shareholders and employees. It will also ensure continuing high quality service for our US packaged gases customers.”

///Photo Courtesy of Linde

On December 4, the final piece of the Air Liquide chessboard was placed, as Linde announced an agreement to buy a 51 percent stake in Taiyo Nippon Sanso, formally part of the Air Liquide acquisition package from Messer Griesheim. Linde believes the transaction, subject to the approval by the responsible anti-trust authorities, will enhance their position in the electronics gases business.

The joint venture, which is based in Krefeld Germany, supplies the European electronics industry with speciality gases such as silane and diborane, liquefied gases such as nitrogen and argon, as well as with the related services and equipment.

A member of the Linde AG Executive Board and CEO of Linde Gas and Engineering, Dr. Aldo Belloni said, “This joint venture will allow us to improve our position in a segment that is enjoying above-average growth, in our core market Europe. Together with our partner, Taiyo Nippon Sanso, which has been successful in the electronics gases market for decades, we will be able to utilise our excellent infrastructure in Europe more efficiently to the benefits of our customers.”

Clearly, all the above were the major events that took place in 2004. “Additional acquisitions and consolidations at country and regional markets are likely to continue in 2005”, said John Raquet, Director of Spiritus Consulting, when speaking at the recent chemical investors conference sponsored by Merrill Lynch and ECN in London.