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Praxair and Linde Set to Merge, Creating Industrial Gas Goliath
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On Tuesday, two giants in the industrial gas industry closed on a deal to create a mega company with a combined market value of $66.6 billion. Praxair Inc. (PX - Free Report) and Germany’s Linde AG have agreed to join forces after two years of on-again, off-again merger talks after Praxair, which is based in Danbury, Connecticut, committed to preserving jobs in Germany in order to win the approval of Linde’s directors.
The two companies said they had agreed to a “merger of equals,” where each company would control half of the board seats of the newly combined entity. The business will be called Linde, and their respective shareholders will each hold 50% of the stock; it will be listed on both the New York Stock Exchange and the Frankfurt Stock Exchange. The new company would have roughly $30 billion in annual sales before divestitures.
"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 CEO. "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, CEO of Linde.
Regulators still need to approve the mega-merger. A Linde-Praxair combination comes at the end of a year that saw increased scrutiny over U.S. companies implementing foreign mergers to avoid U.S. taxes, though Praxair did not cite any tax savings as a primary driver for the merger. The Obama administration tried to crack down on such deals, and President-elect Donald Trump has criticized them as well.
Within the industry, Linde is No. 2 and Praxair No. 3, both behind France’s Liquide SA. The industrial gas sector’s performance largely depends on energy prices and oil and gas activity, and when both declined a few years ago, the industry experienced a slowdown, impacting performance and causing companies to consolidate in order to gain scale.
However, as oil prices begin creeping back up and more OPEC members agree on cutting production, the industrial gas industry could see a turnaround. Companies like Linde and Praxair provide gas mixtures, like helium and pure oxygen, that are used in many industrial applications; customers include oil drillers and refiners, hospitals, and chemical makers, according to the Wall Street Journal. The two companies also make gases used in manufacturing and food production.
As a result of the news, Linde shares traded 1.8% lower in Frankfurt, while PX stock is down just over 4% to $118.04 per share in late-morning trading.
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Praxair and Linde Set to Merge, Creating Industrial Gas Goliath
On Tuesday, two giants in the industrial gas industry closed on a deal to create a mega company with a combined market value of $66.6 billion. Praxair Inc. (PX - Free Report) and Germany’s Linde AG have agreed to join forces after two years of on-again, off-again merger talks after Praxair, which is based in Danbury, Connecticut, committed to preserving jobs in Germany in order to win the approval of Linde’s directors.
The two companies said they had agreed to a “merger of equals,” where each company would control half of the board seats of the newly combined entity. The business will be called Linde, and their respective shareholders will each hold 50% of the stock; it will be listed on both the New York Stock Exchange and the Frankfurt Stock Exchange. The new company would have roughly $30 billion in annual sales before divestitures.
"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 CEO. "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, CEO of Linde.
Regulators still need to approve the mega-merger. A Linde-Praxair combination comes at the end of a year that saw increased scrutiny over U.S. companies implementing foreign mergers to avoid U.S. taxes, though Praxair did not cite any tax savings as a primary driver for the merger. The Obama administration tried to crack down on such deals, and President-elect Donald Trump has criticized them as well.
Within the industry, Linde is No. 2 and Praxair No. 3, both behind France’s Liquide SA. The industrial gas sector’s performance largely depends on energy prices and oil and gas activity, and when both declined a few years ago, the industry experienced a slowdown, impacting performance and causing companies to consolidate in order to gain scale.
However, as oil prices begin creeping back up and more OPEC members agree on cutting production, the industrial gas industry could see a turnaround. Companies like Linde and Praxair provide gas mixtures, like helium and pure oxygen, that are used in many industrial applications; customers include oil drillers and refiners, hospitals, and chemical makers, according to the Wall Street Journal. The two companies also make gases used in manufacturing and food production.
As a result of the news, Linde shares traded 1.8% lower in Frankfurt, while PX stock is down just over 4% to $118.04 per share in late-morning trading.
Stocks that Aren't in the News…Yet
You are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. Many of these companies are almost unheard of by the general public and just starting to get noticed by Wall Street. They have been pinpointed by the Zacks system that nearly tripled the market from 1988 through 2015, with a stellar average gain of +26% per year. See these high-potential stocks now >>