Houston’— Praxair’s effort to revive merger talks with Linde will probably win greater acceptance from the German company after a recent management shake-up, giving a boost to a potential deal that would create the world’s largest supplier of industrial gases.
Linde chief financial officer Georg Denoke has already left the Munich-based company, and CEO Wolfgang Buechele will not stay past April.
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The management disarray could help Praxair CEO Steve Angel grab the reins of the combined company without having to share leadership with his counterparts at Linde, as was originally planned, said UBS Group analyst John Roberts.
Praxair sent a revised proposal for a "merger of equals", Linde said on Tuesday.
An agreement between the companies would leave antitrust scrutiny as the biggest obstacle to the pact, after earlier talks collapsed in September and were followed the next day by announcements that Linde’s top two executives would leave.
Manoeuvring by Denoke contributed to the surprise failure of the deal, Bloomberg News reported at the time.
"With Denoke reportedly against the deal, his departure might make it easier this time," said Jason Miner, an analyst at Bloomberg Intelligence.
Praxair confirmed its overture to Linde and said there was no assurance that a transaction would result. Neither the US-based company nor Linde provided terms of the proposal.
Antitrust Scrutiny
A Praxair-Linde deal would still attract intense antitrust scrutiny to an industry that supplies gases such as oxygen and hydrogen used at hospitals, oil refineries, chemical plants and steel fabricators.
France’s Air Liquide, the largest industrial gas supplier, completed its biggest deal in May with the $13bn acquisition of Airgas. Combining Linde and Praxair — the world’s next-biggest providers — would leave only three major players, including Air Products & Chemicals.
Roberts said Praxair probably gained confidence for its Linde proposal after antitrust regulators used a regional analysis to conclude that combining Air Liquide and Airgas would not hurt competition.
Fewer Bidders
Miner said buyers of industrial gases, however, were likely to object to losing another major supplier.
The products are typically sold under 10-to 20-year contracts, so the owner of a new petrochemical plant or oil refinery would want as many companies as possible bidding to supply a project.
Antitrust regulators might no longer be satisfied that companies had little regional overlap in their existing businesses if a merger left only three global companies to bid on new supply contracts, he said.
"The battle is all about new projects," Miner said. "The list of bidders will shrink, not grow" if Praxair and Linde combined.
A month after Denoke’s abrupt departure from Linde, Angel said he would be willing to resume merger discussions.
The combination would have a better geographic balance that would leverage the strengths of each company, he said on a conference call on October 27.
It would offer "compelling" cost savings and a "robust" balance sheet, Angel said at the time.
Bloomberg
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