BY Richard Summerfield
Multinational chemical company Linde AG and US rival Praxair, Inc have announced a $65bn merger of equals via an all-stock transaction. Under the terms of the merger, existing Linde and Praxair shareholders would each own about 50 percent of the newly combined company, according to a joint statement announcing the deal.
Merger talks between the two companies had collapsed earlier this year; however they were revived following the dismissal of Linde’s finance director Georg Denoke. The merger, like many of the industry consolidation deals announce in 2016, is expected to encounter some tough regulatory scrutiny.
The two companies have pursued a merger in order to create a new industry leader from two regional giants. Linde’s business focuses primarily on Europe and Asia, while Praxair is more dominant in the US and Latin America. Linde is currently the industry’s second biggest specialty gas provider; Praxair is the third biggest. According to data from the companies, a combined Linde-Praxair combination would generate around $30bn in annual sales before divestitures.
The companies have also identified considerable cost savings as being a key driver behind the deal, targeting annual cost savings of around $1bn.
"The strategic combination between Linde and Praxair would leverage the complementary strengths of each across a larger global footprint and create a more resilient portfolio with increased exposure to long-term macro growth trends," said Steve Angel, Praxair’s chairman and chief executive. "We consider this to be a true strategic merger, as it brings together the capabilities, talented people and best-in-class processes of both companies, creating a unique and compelling opportunity for all of our stakeholders."
"Under the Linde brand, we want to combine our companies’ business and technology capabilities and form a global industrial gas leader. Beyond the strategic fit, the compelling, value-creating combination would achieve a robust balance sheet and cash flow and generate financial flexibility to invest in our future," said Professor Dr. Aldo Belloni, chief executive of Linde.
Mr Angel will become chief executive of the new company. Linde’s chairman Wolfgang Reitzle will continue in that role. The new board will have equal representation from both companies.