Praxair, Inc., has revealed this morning that it is to divest the majority of its businesses in Europe to Taiyo Nippon Sanso Corporation (TNSC), as it strives to secure antitrust approval in the region for its mega merger with Linde AG.

For Praxair and Linde, it represents another significant step forward in their proposed $70bn merger.

For TNSC, parent company of MATHESON, purchasing these European assets is another significant step forward too. The company has openly pursued a path of expansion beyond its domestic Japanese market for many years now and the acquisition is described as a ‘unique opportunity’.

Yujiro Ichihara, President and CEO of TNSC, explained, “With this acquisition, we are seizing a unique opportunity to enter the European market and establish a truly global footprint through the purchase of highly attractive assets in all the key geographies in the European Union.”

“We look forward to growing these highly profitable businesses and welcoming the experienced and dedicated Praxair European team to TNSC.”

Linde-Praxair: TNSC to acquire European assets

In 2015, TNSC announced its Ortus Strategy Stage 1, a medium-term management plan set out to ensure future company growth. This included structural reforms that aimed to strengthen its earnings base in Japan and raise company efficiency.

Ortus Stage 1 initially set out to accomplish sales of ¥600bn ($4.8bn), an operating profit of ¥45bn ($365m), 8% or higher ROCE and a 40% or higher ratio of overseas sales to total sales in the fiscal year ending March 2017.

As part of this, TNSC expanded its operations in South East Asia, gaining new production contracts in countries such as the Philippines and Indonesia. A key region in which there has been a noticeable increase in M&A activity is one of TNSC’s largest overseas markets, the US. There was a significant acquisition push in the US from the company in 2014/15, with notable business purchases in California and Hawaii. TNSC also conducted a high-profile acquisition of Continental Carbonic in the US, through subsidiary company MATHESON Tri-Gas.

This expansion in the US has also continued into more recent years, with MATHESON acquiring a number of Air Liquide and Airgas assets divested as part of Air Liquide’s $13.4bn acquisition of Airgas in 2016.

Intelligence insight: What is TNSC’s Ortus strategy?

Stage 2 of its Ortus strategy commenced in fiscal year 2018, building upon Stage 1 by focusing largely on profitable growth.

Under Ortus Stage 2, TNSC revealed plans to invest ¥340bn ($3bn) over a four-year period, of which 70% will be allocated to strategic investments. These investments would centre on M&A and large-scale capital expenditures both nationally and internationally.

Additionally, TNSC announced it would expand its business territory and reinforce operational density, acquire new products, technologies and supply chains, and expand its medical business.

Europe had not appeared to be a central pillar of this strategy in a 2015 interview with gasworld, during which Ichihara had pointed to “empowering our individual regions – Japan, the US, Southeast Asia, and China – with controlling responsibility in order to foster agile organisations that can respond immediately to changes in market environments and thereby accelerate the global growth of our group.”

TNSC interview (2015) – Synergy, strength and a shifting sales strategy

The acquisition of the majority of Praxair’s European business – assets which generated annual sales of approximately €1.3bn in 2017 and are being acquired for €5bn in cash consideration – is therefore a further fillip for TNSC as it continues on this global path of expansion.