AI Air Liquide SA

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 15, 2016 19:47 ET (23:47 GMT)

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