The expression ‘what goes around, comes around’ springs to mind with the merger of Praxair, Inc. and The Linde Group, sharing roots that date back to World War I as they so notably do.
Following the War, Linde assets were confiscated and sold to Union Carbide in 1919 – which included the rights to use the Linde name in the US. From 1963, the industrial gases arm of Union Carbide was known as ‘the Linde division’. When Union Carbide decided to spin-off that gases division in 1992, Praxair was formed.
Since then, Praxair has carved out an illustrious recent history in its own right, establishing itself as the most performance driven industrial gases company – a status it still holds today – and improving its financial performance through the 1990s and 2000s.
Now, these two heavyweights in industrial gases and equipment are coming together in a mega-merger of equals that will change the face of the industry, globally. So what else has happened in the quarter of a century that Praxair has risen to leadership status in the market? Here, we take a look at the journey’s of some of the lead protagonists in the merger, as well as a selection of similarities and differences across the wider economic, political and societal landscape from 1992 to 2018.
Let’s start with the wider world we find ourselves in today, compared with that of 1992. Even a cursory glance at some of the easily-sourced facts from the year of Praxair’s birth, 1992, throws up some uncanny parallels to the political and economic landscape of today – and more of those journey’s that head full circle again.
Back in January 1992 for example, North Korea signed an accord with the International Atomic Energy Agency allowing for international inspections of its nuclear power plants. Fast forward 25 years of hostility, threats and counter-threats, and a tooling up of its nuclear missile capabilities, and this year the world was surprised to see several apparent signs of a thawing in those hostilities between North Korea and its foes. In April, leader Kim Jong-un became the first North Korean leader to cross the Demilitarised Zone into South Korea since its creation in 1953, to meet with his counterpart in the South, President Moon Jae-in.
One month later, and journalists reported that tunnels in the Punggye-ri nuclear test site had been destroyed by the North Korean government in an attempt to reduce regional tensions. Further still, in the weeks that followed, the 2018 North Korea-United States Summit was held in neutral ground in Singapore – the first summit between a US President (Donald Trump) and the North Korean leader.
Less friendly is the apparent diplomatic relations these days with Russia and its old foes. Whilst on 1st February 1992 then US President George W. Bush met with Russian President Boris Yeltsin at Camp David to formally declare the Cold War as being over, one could argue that 2018 has seen the fires of discord stoked again and the first footings of a new Cold War.
When former Russian double agent Sergei Skripal and daughter Yulia were poisoned by the Novichok nerve agent in Salisbury, UK in March (2018), speculation snowballed that the Kremlin was behind the incident and relations have frosted ever since, with more than 100 Russian diplomats expelled by over 20 countries by the end of the month and various claims still swirling today. Alleged Russian involvement in various Western elections in recent years has also strained those frail relations.
Staying in the European Continent, and the inescapable story we have to mention here is of course, the European Union (EU). Back in February 1992, the Maastricht Treaty was signed, officially founding the EU. Within months, Denmark had rejected the Treaty by a narrow margin in a national referendum (2nd June 1992); the parallel here of course is, having narrowly voted to leave the EU in a national referendum in 2016, the UK’s ‘Brexit’ is wreaking havoc at home and in the EU as 2018 unfolds and, it is suggested, creating question marks over the future of the EU as a result.
On the topic of trade, and another almost eerie parallel between 1992 and 2018 exists in the shape of the North American Free Trade Agreement (NAFTA). Announced in the August and formally signed on 17th December 1992, the NAFTA was a landmark agreement between the US, Canada and Mexico. As of today, the deal has just been renegotiated in principle (1st October) amidst simmering trade tensions between the three countries in more recent times and various tariffs mooted.
Other trade tariffs are also available; 2018 has become the year of the tariff, with the US announcing tariffs on imported steel and aluminium to China, the EU, Mexico and Canada, among others. China has since accused the US of starting ‘the largest trade war in economic history and announced immediate tariffs of its own in response.
Tariffs may have been making the news, but 2018 is in fact designated as the third International Year of the Reef by the International Coral Reef Initiative. What parallels does this hold with 1992? Well, on 8th June that year, the first ‘World Oceans Day’ was celebrated and coincided with the Earth Summit held in Rio de Janeiro, Brazil. At a time when we are arguably more aware and conscious of our impact on our oceans and the planet as a whole as a result of emissions, plastic waste and more, what better parallel to draw between these two years?
Finally, with technology evolving beyond all recognition over the last quarter of a century, here’s an interesting highlight. In terms of units sold, compact discs (CDs) outsold audio tapes/cassettes for the first time in the US in 1992; how appropriate then that Apple Inc., the innovative company that brought us the iPod and defines digital in so many ways, this year became the world’s first public company to achieve a market capitalisation of $1 trillion. That’s progress in a statement right there.
Industrial gases – then and now
If we cast our minds back to the industrial gas landscape of 1992, we can recall a vastly different market. The global gases market was worth around $23bn back then, according to gasworld Business Intelligence, and has grown considerably since.
Today, this is a market that may still be a fairly small proportion of the wider chemicals industry, but is now valued at over $70bn – demonstrating robust demand for a range of industrial gas products across a vast array of industries and applications.
But, appropriately for our story of the day, few subjects have changed the face of the industrial gases industry over the past 25 years more than M&A. Not only has M&A activity impacted the players involved in the industry, it also has reshaped the structure of the supply chain.
Back in 1990, for example, the major players in the US market included BOC, Air Liquide, Air Products, Messer, AGA, and Praxair (then still known as the Linde Division of Union Carbide), each of which had both production and distribution segments of their business. Linde AG had very little presence in the US, in fact it was not until 1998 that The Linde Group bought back the licence to use the Linde name again in the US.