Big Gas Suppliers Weigh Tie-Up -- WSJ
August 16 2016 - 3:03AM
Dow Jones News
By Eyk Henning and Dana Mattioli
Praxair Inc. is in discussions to combine with Germany's Linde
AG, people familiar with the matter said, in a deal that would
create the world's largest industrial-gas supplier and continue a
wave of consolidation in the industry.
Details of the talks couldn't be learned, and one person
cautioned they are fragile and could fall apart. If there is an
agreement, there is also no guarantee antitrust regulators would
approve it. A deal would combine companies each worth about $30
billion and rank as one of the largest tie-ups in a strong year for
mergers.
The news comes less than three months after two major rivals of
the companies combined, setting off another possible wave of
consolidation in an industry hit by declining energy prices and
sluggish economic growth. Air Liquide SA in May bought Airgas Inc.
for about $10 billion, enabling the French company to reclaim the
No. 1 spot among makers of gases used in manufacturing, food
production, health care and the like, with annual revenue of more
than $23 billion.
Munich-based Linde, which makes industrial and medical gases and
builds plants for chemical producers and others, had taken the No.
1 position from Air Liquide with its $14 billion takeover of the
U.K.'s BOC PLC in 2006. A combined Linde and Praxair would again
leapfrog Air Liquide, creating a company with more than $30 billion
in revenue -- before any divestitures.
But in the wake of the Airgas deal, some analysts questioned
whether antitrust regulators would allow another large takeover in
the industry.
What is now called Praxair was once part of Linde. Founded as
its American arm in 1907 and then known as Linde Air Products Co.,
the company developed so rapidly that by World War I it was bigger
than the German parent, according to Linde's website. In the early
part of last century, Linde Air Products was acquired by Union
Carbide Corp., which spun the company off in 1992 and named it
Praxair. Union Carbide is now part of Dow Chemical Co.
Based in Danbury, Conn., Praxair has 26,000 employees in more
than 50 countries and was the first company in the U.S. to produce
oxygen using a cryogenic process, according to its website.
The company in late July reported revenue in the first half of
the year slipped by nearly 6% to $5.17 billion, due mainly to
adverse currency moves. It also issued a downbeat outlook, warning
about the effects of economic sluggishness. Its shares, like those
of Linde, have significantly underperformed the S&P 500 in the
past five years.
Linde's revenue and operating profit in the first six months of
the year were also weighed down by currency shifts as well as weak
oil prices, which resulted in sluggish demand from energy companies
at its engineering unit. Linde's overall revenue fell by about 5%
to EUR8.56 billion ($9.57 billion) in the period.
Meanwhile, Air Liquide fell short of analysts' estimates in the
first half as the company was similarly weighed down by its
engineering division.
Should a deal between Praxair and Linde come to fruition, it
would continue a strong run for the mergers-and-acquisitions
market. The dollar volume of deals is down 22% from last year's
record level, but it still stands at more than $2 trillion,
according to Dealogic, which is strong by historic standards, as
low interest rates, sluggish economic growth and tie-ups by rivals
provide strong incentives for companies to merge.
Write to Eyk Henning at eyk.henning@wsj.com and Dana Mattioli at
dana.mattioli@wsj.com
(END) Dow Jones Newswires
August 16, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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