Bob VanKirk, Head of Distributors and Packaged Gases for Linde North America, says the Federal Trade Commission (FTC) is searching for a fifth Tier One player to keep the market competitive and push through the Praxair-Linde merger.
Vankirk spoke about the current status of the $70bn Praxair-Linde merger on the final day of the Gases and Welding Distributors Association (GAWDA) 2018 Annual Convention here in Seattle, WA.
But as this was an on-going negotiation with the FTC, VanKirk limited his comments to the lead up process over the past 18 months.
He also revealed that Linde and Praxair have had to deal with 20 to 30 country regulators concerning the merger and that the FTC was still in discussions with both parties on what will be acceptable.
“History shows a pattern to the FTC decisions over the past 15 years,” said Vankirk at the Sheraton Seattle Hotel.
“The FTC is looking for a fifth player to remain within a competitive environment. In 2006, the FTC insisted that the Linde-BOC deal resulted in enough gas production assets to be sold to another party, which resulted in the bulk business being sold to Airgas.
“In 2010, while it never succeeded, Air Products had already negotiated to sell all the bulk ASUs when they made a hostile bid for Airgas. Then in 2015/6, the acquisition of Airgas by Air Liquide resulted in a sale of many ASUs and CO2 plants to MATHESON (TNSC), resulting in MATHESON moving from a regional to national player in the US market.
“The Linde-Praxair merger requires a large number of air separation units (ASUs) and CO2 plants to be sold and that currently Messer/CVC have agreed to acquire these assets.”
Vankirk stated that currently the merging parties are still waiting for anti-trust approval from the FTC, the South Korean and Chinese authorities. He admitted there is a tightening deadline of the 24th October for the main approvals to be confirmed. This was set by the German Securities Law which allows 12 months to achieve approval from finalising the deal with shareholders.
VanKirk, who has 30 years’ experience in the industry after starting with Airco in 1988 and then moving to the BOC organisation until 2006 when Linde took over the BOC Group, then turned his attention to helium.
He explained helium has a large spotlight on it at the moment for several reasons. The first being that the US Bureau of Land Management’s (BLM) has completed its last public auction; secondly, the Praxair-Linde deal will result in a change of ownership of some helium assets (in Europe and in North America). Another area of interest and concern is the future of sourcing helium – both in the US and worldwide.
The current global capacity is around 7 billion standard cubic foot (scf), while the capacity in the US has been impacted by lower helium streams due to the depletion of the BLM and some other fields. This, together with lower output from Algeria and Qatar, has led to a tightening of supply and the subsequent high prices of helium bid in the BLM auction on 31st August.
Publicly stated prices rose 47% as a result of the last auction. This will have an impact on helium prices around the world as many supply contracts to the major gas companies are fixed or associated with the posted BLM price.
The future is unclear as there are currently no new pricing mechanisms in place. Some projects for increased helium capacity have slowed or are delayed, namely the Qatar Helium 3 project (now 2019/20) and the Russian Far East project, which is currently slated for 2021/2. Certainly by 2022, BLM material will no longer be commercially accessible.
VanKirk briefly covered the tightness in the market of carbon dioxide (CO2) and said that picking your source is important for its reliable operation. While ethanol had become a much more favoured source of CO2 in the past 15 years over ammonia, ethanol and bio-ethanol plants are not always reliable due to market conditions such as grain prices.
Due to supply issues, VanKirk went on to say that end-users – namely food processors – were looking at dual product supply, liquid nitrogen or liquid carbon dioxide, to avoid outages due to lack of product.