Germany's biggest industrial gases maker Linde has agreed to buy British BOC Group for 8 billion pounds ($14 billion) and becomes the world leader in the worldwide industrial gases market.

Linde will pay 1,600 pence a share in cash for BOC, which will recommend the bid to investors, the companies said in a statement today.

The offer represents a premium of 39 per cent to the closing price of 1,151 pence per BOC share on 23 January 2006, being the last business day prior to the announcement by BOC that it had received an approach from Linde.

A new leading player

The transaction will create a leading worldwide industrial gases and engineering group with combined gas and engineering sales of approximately Euro 11.9 billion. Both companies have complementary geographic positions and products. With the acquisition of BOC, Linde will in particular enhance its position in the fast growing Asian Pacific region and in key future growth sectors such as hydrogen.

Linde / BOC - a perfect match

Prof Dr-Ing Wolfgang Reitzle, CEO of Linde, said:'I am delighted that BOC's board has decided to recommend our proposed offer. Linde and BOC are a perfect match. We will combine the best competencies and abilities of both organizations in a single integrated group and we will be able to offer our customers a significantly enlarged product range as well as comprehensive services - and we will be able to do so worldwide. We will have an even better entrance into the international fast-growing markets which will provide the basis for stable future earnings and cash flows. With this acquisition we will continue to focus on our strategy of dynamic, earnings-based growth and to achieve a sustained creation of value. Linde and BOC have enjoyed excellent relations over many years and we look forward to welcoming the BOC management and employees into the enlarged Linde Group.'

Both companies already enjoy a good relationship and given the complementary nature of the businesses, Linde believes it can realize synergies resulting from the transaction quickly and efficiently. Linde has experience with integration processes: The Swedish gas company AGA was integrated rapidly into the group following its acquisition in 2000. With this acquisition Linde's sales related to the gases business were more than doubled.

The enlarged group will have a complementary worldwide footprint with a presence in approximately 70 countries. In particular, in the fast-growing region of Asia/Pacific, Linde will profit from the regional strength of BOC. In Europe and South America, Linde will consolidate its existing strong position.

The transaction also carries significant potential on the product side: jointly with BOC, Linde will have a leading market position in the cylinders, liquid gas and onsite segments. In addition, Linde and BOC together will cover key market segments in industrial gases in a leading position (e.g. manufacturing, food and metallurgy).

Linde believes the combination creates an opportunity to deliver synergies throughout the group, prior to one-off expenses, of approximately Euro 250 million per annum, to be fully realized during 2009. These synergies will be predominantly based on joint supply management optimisation and combined procurement volumes and a reduction in selling, general and administrative expenses. Linde anticipates one-off expenses of around Euro 200 million all of which are expected to be incurred before the end of 2008.

Acquisition funding

The funds necessary for the acquisition will be provided under a credit facility entered into with Commerzbank AG, Deutsche Bank AG, Dresdner Bank AG, Morgan Stanley International Limited and The Royal Bank of Scotland plc. The credit facility will be refinanced through a combination of a capital increase in an amount of Euro 1,4 to 1,8 billion, hybrid capital (1,2 to 1,6 Euro billion), the issue of bonds, bank loans and the divestment of selected activities. It is Linde's intention to maintain an investment grade rating for the combined group. In the course of focusing further on the industrial gases and engineering business, Linde is also considering various strategic options for its business segment Material Handling.