In 1898, Adolf Messer started a company from his workshop in Frankfurt-Höchst, Germany, for the fabrication of acetylene gas generators. He employed four blue-collar workers and one salaried employee.
Fast-forward 120 years and this company is known as The Messer Group, employing some 8,600 employees worldwide in more than 30 countries.
That footprint’s about to expand a whole lot more with today’s confirmation that a consortium comprised of Messer and CVC Capital Partners Fund V11 is to acquire the majority of Linde’s gases business in North America and certain business activities in South America.
The business to be sold generated annual sales of approximately $1.7bn (€1.4bn) and an EBITDA of just over $360m (€305m) in 2017. But this acquisition is about much more than numbers alone; it’s also about the company coming full circle in its journey in the Americas region.
Just as the mega merger of Praxair and Linde essentially sees the new entity revisit roots dating back to World War I when Linde AG was forced to exit the US gases market and those gas assets became what we know as Praxair, Inc. so many decades later (1992), here with Messer there is a certain sense of symmetry or romanticism to its re-entering of the Americas.
The company was first formed in 1898 by Adolf Messer and was named the Frankfurter Acetylen-Gas-Gesellschaft Messer & Cie in Höchst.
It was later renamed in 1945 to simply Adolf Messer GmbH, after consolidating three business areas which included cutting and welding, cryogenic plant and tank manufacturing, and production of industrial gases. In 1965, after a merger with part of Knapsack-Griesheim AG (a member of the Hoechst Group) and under Adolf’s son Hans Messer, it became Messer Griesheim GmbH.
In the years following the merger, the company grew in both Europe and North America and would go on to celebrate its centenary in 1998.
In 1993, Hans Messer took a step back from running the business and handed the reins over to a manager from outside the family. After a risky expansion course and the near-collapse of the company, the founder’s grandson, Stefan Messer (pictured below), was eventually appointed CEO in 1998.
Together with financial investors, he put the company back on its feet over a period of three years and in 2001 Hoechst AG (now Aventis) confirmed its divestment from the company with the sale of its shares in Messer to Goldman Sachs (Private Equity Funds) and Allianz Capital partners. The new board set about re-structuring and divesting some of Messer’s global interests acquired in the mid to late 1990s and improving the profitability of the company.
In late 2003, however, both Goldman Sachs and ACP decided to exit the business and almost two-thirds of the company were sold off, with Air Liquide picking up Messer’s industrial gas operations in the UK, US and Germany in 2004. Simultaneously, the Messer family, through its holding company Messer Industrie GmbH (MIG), announced that it would acquire the remaining shares in the old Messer Group, a transaction that was completed in May 2004 and not only saw Stefan Messer restore the group’s status as a family-owned business, but also marked the birth of the Messer Group as we know it today.
Now, with the pending acquisition of these Linde assets in the Americas region, that Messer Group as we know it today resembles a little more of the Messer Group that we knew decades ago.
What this Back to the Future journey tells us is not only that the industrial gas industry can be a case of what goes around comes around, but also that the industrial gases industry has long been an attractive asset for the investment community.
Family, sustainability, responsibility, and independence are words that embody the ethos within the Messer Group today.
Since returning to family ownership in 2004, the group has focused on its core markets and the expansion of its ASEAN business. Together with the workforce of around 8,600 employees, Stefan Messer works in line with defined values and growth strategies.
The group has proven over the last decade that it can successfully marry its cautious, some might say conservative, approach with hard profitability and business success and has flourished as it has strategically built-out in key geographies, carved out a renewed profile based on its traditional, trusted values of old, and still achieved compelling revenues.
At the time of a gasworld exclusive Interview of the Month with Stefan Messer last year, the group had invested more than €2bn in total since 2004, focusing on the consolidation of its European business and expansion in China.
“Well, Rob, as you know we have been very active in the last decade,” Messer said warmly. “I think I can say we are changing our profile from a little family-owned company to a global player who, however, is putting all efforts in conserving its humbleness.”
2011 was a significant year in this profile evolution, as the group not only transitioned to its new headquarters, but also took a fully-fledged seat at the so-called Tier One table of major industrial gas players; becoming the latest company to break the billion barrier in revenues. It was a record fiscal year for the group, bettering its total sales in 2010 by €120m and achieving worldwide sales of €1.029bn as a result. A cautious, but considerable investment strategy was certainly paying dividends – and it still is.
“We had to secure our independence and consolidate the European business first,” he affirmed to gasworld last year. “At the same time we achieved growth, mainly due to participation in the incredible development of the Chinese market. This strategy was the right one in the last decade.”
It certainly was, and that trajectory has positioned the company to be able to take advantage of further global growth opportunities. The group has pursued carefully identified growth markets in the Asia-Pacific region, particularly in the fast-growing Vietnam market where the group has a market share of just over 22% (2016) according to gasworld Business Intelligence.
Messer has also been steadily furthering its activities in China, and as recently as May 2017 announced its entry into the promising Malaysian market, establishing a joint venture (JV) with Universal Industrial Gases Sdn Bhd (UIG) in which Messer owns more than 60% of the company’s shares.
The next step was, therefore, bring the story full circle, perhaps always with an eye on any assets to be divested as part of Praxair and Linde’s mega merger.
‘Not a contradiction’
The freshly confirmed merger of equals between fellow Tier One players Praxair and Linde had been projected to result in up to $2.5bn worth of divestments globally, much of which would will likely be in Europe and North America, and many were quick to join the dots in thinking that Messer would be well placed to benefit from this sell-off.
Messer acknowledged in our interview that the ‘competitiveness of our business is increasing day by day’ in the face of this new wave of M&A, and affirmed that it would not go against the group’s ethos to consider such opportunities. “Acquiring new business divested by our bigger competitors is not necessarily a contradiction to our strategy of sustainable growth, especially in view of the higher geographical diversification of our business which we declared to be an important goal,” he said.
While he would not be drawn on any re-entry in the North or South American market at that time, these are clearly exceptional circumstances and ‘unique opportunities’ thrown up by the merger of Praxair and Linde, as TNSC testified itself in moving to acquire Praxair assets in Europe in the last fortnight.
The newly revealed acquisition will see the Messer-CVC joint venture – to be named MG Industries and operate under the Messer brand – take over substantially all of Linde’s US bulk business as well as its business in Brazil, Canada and Colombia at a purchase price of $3.3bn.
The specific details of the businesses in question are not known, but Messer will be gaining a substantial footprint in each of the geographies to be acquired, with gasworld Business Intelligence estimating Linde to have a market share of 12% in Brazil in 2016, 41% in Colombia (2016), and just under 20% in Canada (2016). In the US, it occupied a more than 15% market share in 2016.
It’s clearly a unique opportunity worth taking and a price worth paying to build a truly global player in the industry and take the Messer journey full circle. Indeed, Stefan Messer reflected in today’s announcement, “In creating this strategic partnership, we are seizing a unique opportunity to return to the North and South American markets and create a global player in the industrial gases sector.”
For all the latest breaking news, views and analysis of the ongoing merger of equals between Praxair, Inc. and Linde AG, stay tuned to gasworld’s Praxair-Linde Zone at www.gasworld.com/praxair-linde-zone.
Check out the zone for insights into the M&A climate, regional industrial gas markets and the potential impact of the merger on those markets – and much more besides.