Reports suggest the European Commission (EC) has privately outlined its antitrust concerns to Praxair and Linde over the terms of their $70bn merger of equals.

It is understood that competition Commissioner Margrethe Vestager has sent a confidential statement of objections (SO) outlining concerns over the combined group’s effect on the industry’s competitive landscape in Europe.

No official statement or confirmation has yet been issued by either party.

The EC confirmed on 16th February that it had opened an in-depth investigation into the merger amidst concerns that the deal may reduce competition in the supply of several crucial gases in Europe.

The Commission said it was particularly concerned about the merger’s impact in the oxygen and helium markets. Commissioner Margrethe Vestager, responsible for competition policy, had said, “Gases – like oxygen and helium – are crucial inputs for a large variety of products we use every day. Manufacturers need to buy these gases from a small number of suppliers. We will carefully assess whether the proposed merger between Praxair and Linde would lead to higher prices or less choice for European consumers and businesses.”

EU opens investigation into Praxair-Linde merger

The transaction would reduce the number of major players active worldwide and in Europe for the supply of carbon dioxide (CO2), oxygen and helium, and many other gases, to just three. Other players in the market only have regional, national or local presence and lack the technical and financial capabilities to compete on an equal footing, the Commission explained.

In addition, there is no indication that competition could be fostered by new entrants, due to the very high investment necessary to establish a meaningful position in the market.

The transaction was notified to the Commission on 12th January 2018.

Merger of equals

News of preliminary discussions between Praxair and Linde broke in August 2016, creating a flurry of speculation and coming hot on the heels of another game-changing acquisition in the industry, with Air Liquide completing the $13.4bn acquisition of Airgas, Inc. just months earlier.

Praxair and Linde announced a deal in principle in December 2016, with a non-binding term sheet providing for a combination of the group’s business under a publicly traded new holding company bearing Linde’s name (Linde plc).

Praxair-Linde: Understanding the rationale

The new holding company would be listed on both the New York Stock Exchange (NYSE) and the Frankfurt Stock Exchange. Likewise, membership in the board of the combined company will be split 50:50 between Linde and Praxair; current Praxair Chairman and CEO Steve Angel would become CEO of the new holding company, and current Chairman of the Supervisory Board of Linde AG, Professor Dr. Wolfgang Reitzle, would become Chairman.

Corporate functions would be appropriately split between Danbury, Connecticut (US) and Munich, Germany.