Widespread reports this morning are suggesting that talks could be back on the table between Praxair Inc. and The Linde Group regarding a merger of equals that would redefine the structure of the global industrial gases business for the second time in the last 12 months.
Praxair has issued a brief statement confirming that it has approached Linde AG about resuming discussions. Linde confirmed it is reviewing the proposal.
News of preliminary discussions between the two companies broke in August this year, creating a flurry of speculation. The ink had barely dried on another game-changing acquisition in the industry; talks came just weeks after fellow Tier One player Air Liquide had itself closed the $13.4bn acquisition of Airgas, Inc.
Talks between the two companies broke down in September, however, almost as soon as they had started. Despite the strategic rationale principally confirmed, talks were terminated amidst a lack of ‘mutual understanding’.
This was swiftly followed by the announcement of two executive departures at Linde, with Chief Financial Officer Georg Denoke leaving his post with immediate effect and CEO Dr. Wolfgang Büchele revealing he would not be available for a second term. His tenure as CEO will now come to an end in April 2017.
Reports were naturally rife since then that cultural differences may have been behind the breakdown in discussions, as well as a lack of agreement over the location of key functions and responsibilities.
If overnight supposition is anything to go by, as the year draws to a close any prospective merger could be reignited. As with the original talks, however, caution is urged that a deal is far from guaranteed. Praxair noted, “There can be no assurance that this will result in a transaction, or on what terms any transaction may occur.
Air Liquide’s acquisition of Airgas had already shifted the landscape in the global industrial gases business, and in the North American market in particular, creating a new combined leader in North America and complementing number one positions in Europe, Africa/Middle East and the Asia-Pacific.
Globally, the combined business will generate annual sales of approximately $22bn and will serve over three million customers.
Any merger of equals between Praxair and Linde, however, would further shake up the structure of the $80bn global gases business. gasworld Business Intelligence had previously projected a combined global market share of 33%, pre-divestment.
James Barr, Senior Business Analyst, had said in August, “The merger is possible but it would be complicated. In particular, the US would present one of the largest hurdles for the deal to happen, particularly on an onsite level but also across some regions in the merchant gases business.”
Any deal would be subject to anti-trust regulations, of which Barr added, “The largest anti-trust pressure would come in the US – where the merger’s combined market share would exceed Air Liquide’s current market share of 28% by eight percentage points, assuming that no divestments were necessary. However, it is probable that the Federal Trade Commission (FTC) will have regional issues across the US, which could result in some significant revenues being divested.”
It had also been noted that Praxair and Linde have a number of intertwined moments in their respective histories, dating back to World War I, which would effectively mean any merger would see the two companies take their story full circle.