The $70bn merger of Praxair and Linde has moved another step closer after receiving conditional approval in Brazil, one of the regional markets where the deal was thought to be under particular scrutiny.

According to an announcement made in Portuguese by the Brazilian antitrust authority CADE, the merger was given approval subject to the signature of a Merger Control Agreement (MCA).

The full terms of the MCA have not been disclosed and though no English (language) version of the announcement is available yet, gasworld understands from its Latin American Correspondent that the MCA establishes several structural ‘remedies’ due to the existing high concentration of the Brazilian industrial gases market and that both Praxair (White Martins) and Linde are already significant players in the market.

Within the obligations established by the MCA is the divestment of certain businesses, the details of which are confidential. The agreement also prohibits the new combined company from acquiring, partially or totally, any of the assets which are part of the divested businesses – or participating in future bids for the renewal of contracts concerning any on-site plants to be divested.

Scrutiny

Previous reports had suggested the merger faced particular scrutiny, if not objection, in Brazil due to fears over the effects of the deal in the market’s competitive landscape.

Brazil had also been cited by gasworld business intelligence as one of the major market overlaps for the merger, and the largest hurdle to overcome in South America.

south-america-by-company-2016

South America Market by Company (2016)

Source: gasworld Business Intelligence

Praxair (through subsidiary White Martins) and Linde are the two largest companies in the region, with a combined market share of 66%, prior to any divestments, according to gasworld. In Brazil, far and away the largest gases market in South America with revenues of just over $1.5bn in 2016, Praxair is the largest player through its South American subsidiary White Martins. The second-largest company was Air Liquide, while Linde and Air Products were the other Tier One companies with operations in Brazil, accounting for market shares of 12% and 7%, respectively.

Regional markets: Focus on South America (2018)

gasworld previously projected that a combined Praxair-Linde company, however, would command a market share valued in excess of 70% before any divestment and, therefore, it was highly likely that CADE would not allow for the two companies to combine in Brazil without any divestments being made.

Yesterday’s announcement affirms this expectation and, according to the release from CADE, Praxair and Linde proposed the remedies that might make the deal acceptable.

Approval is another major step forward for the deal; now authorities in Russia (unconditional), Canada and Brazil, among others, have effectively given the deal the seal of approval.

Two of the most keenly anticipated verdicts, however, are still awaited – the Federal Trade Commission (FTC) in the US and the European Commission (EC) are yet to officially announce their decisions. It was reported last week that the EC had given its statement of objections to both parties. The EC declined to comment when contacted by gasworld.

EU concerns reportedly sent to Praxair-Linde 

South America primer report

gasworld Business Intelligence has published a series of primer reports covering each region of concern regarding the Praxair-Linde merger.

For more infomation, contact intelligence@gasworld.com, or to download a sample, please click here.