Gas suppliers Praxair, Linde hold merger talks
(Reuters) US industrial gas supplier Praxair Inc. and German peer Linde AG are in early-stage talks about a merger to create a market leader with a value of more than $60 B, Linde said on Tuesday, sending shares in both companies higher.
An agreement would accelerate consolidation sweeping the industrial gas sector where slower economic growth has weakened demand in the manufacturing, metals and energy sectors and put pressure on smaller players to compete.
A combination of Praxair and Linde, which supply gases such as nitrogen, argon and carbon dioxide, would face scrutiny from regulators after other major deals, such as US oilfield services provider Halliburton Co.'s $34.6 B acquisition of Baker Hughes Inc., were shot down due to antitrust concerns.
Linde has a strong position in healthcare in North America, where it supplies gases to hospitals and patients with respiratory disorders.
Praxair is more focused on industrial on-site production, which means a market share of close to 50% resulting from a merger should not spark opposition from US anti-trust regulators, analysts said.
Linde said talks were ongoing and had not yet yielded any concrete results or agreements.
"Accordingly it is currently not foreseeable whether there will be any kind of transaction," it said in a statement.
Variety of options. Several people familiar with the matter had earlier told Reuters the two companies held talks. One person said Praxair was considering a takeover of Linde, while two other sources said Linde wanted a merger of equals.
One of the sources said a share swap was one possible structure of a deal but that talks were still very preliminary.
"A merger would be good for both companies, and for the sector as a whole," said Christopher Schaefer, a fund manager at Union Investment, a top-20 shareholder of Linde.
Linde has a market value of around $31.6 B, compared with about $33.7 B for Praxair.
Analysts said talks may have been spurred by French Air Liquide's acquisition of smaller US peer Airgas Inc. for $10.3 B this year, making the world's leading industrial gases group a strong second player in North America behind Praxair.
Union Investment's Schaefer said the two companies could be forced to sell some assets to win regulatory approval of a merger, for instance in Brazil, Germany and Canada.
"But not so much that it would hurt the merger partners," he added.
Baader Helvea analyst Markus Mayer said overlaps in the rest of the world could help generate synergies of up to $900 M in a merger.
Perella Weinberg is advising Linde, while Credit Suisse, among others, is working for Praxair, sources said.
Reporting by Mike Stone and Jens Hack; Additional reporting by Vishal Sridhar, Alexander Huebner, Jonathan Gould and Maria Sheahan; Editing by Bernard Orr and Keith Weir
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