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Praxair (PX) & Linde Merger Obtains EU Antitrust Approval

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Praxair Inc.’s (PX - Free Report) proposed merger with Linde AG received conditional EU antitrust approval yesterday. Praxair received the consent after it agreed to sell majority of its European businesses to Taiyo Nippon Sanso Corporation to keep up with competition concerns.

Details of the Merger

In June 2017, Praxair signed a business combination agreement with Linde AG. The proposed all-stock transaction will combine Praxair’s efficient operating model, and Linde’s expertise in engineering and technology. Per the deal, Praxair’s shareholders will be offered one share in the new company for each existing share, while Linde’s stockholders can exchange each share with 1.54 shares in the new entity. Praxair and Linde will each have 50% ownership in the new entity.

The merged company is anticipated to benefit shareholders through the expected $1.2 billion in annual synergies and cost-reduction programs. This is expected to be achieved over a period of approximately three years following the closure of the deal. Subject to the pending closing conditions, the parties involved anticipate closing the transaction in the second half of 2018.

The $80-billion merger deal will create a leading industrial gas company, with a strong international presence, large customer base and solid financial flexibility. Nonetheless, there remains a concern that the deal would raise prices and hurt competition by reducing choice for consumers.

Progress So Far

Thus, Praxair has taken positive approaches to address regulatory concerns with the merger, especially in the European Economic Area. In sync with this, last month, Praxair decided to sell its European assets to Taiyo Nippon Sanso, which generated annual sales of approximately $1.5 billion (1.3 billion euros) in 2017. Taiyo Nippon Sanso will pay 5 billion euros ($5.9 billion) for Praxair’s businesses in Belgium, Denmark, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom.

Praxair also obtained consent from Russian antitrust authority, Committee on Foreign Investment in the United States (CFIUS) and Brazil's antitrust regulator, related to the merger.

In addition, Praxair and Linde have agreed to sell U.S. assets of the former, worth $3 billion, to Messer Group and a private equity group — CVC — in an effort to secure U.S. approval. Moreover, the companies continue to work diligently with the relevant antitrust authorities to close the merger in the second half this year.

Price Performance

Over the past year, Praxair has outperformed the industry with respect to price performance. The stock has gained around 20%, while the industry recorded growth of around 7% during the same time frame.

Zacks Rank & Stocks to Consider

Praxair carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are Celanese Corporation (CE - Free Report) , Huntsman Corporation (HUN - Free Report) and Air Products and Chemicals, Inc. (APD - Free Report) . While Celanese and Huntsman sport a Zacks Rank #1 (Strong Buy), Air Products carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Celanese has a long-term earnings growth rate of 10%. The stock has rallied 19% in a year’s time.

Huntsman has a long-term earnings growth rate of 8.5%. Its shares have gained 23% in the past year.

Air Products has a long-term earnings growth rate of 16.2%. The company’s shares have been up 14% over the past year.

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