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Linde to Buy Lincare Holdings

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Recently, home health care provider, Lincare Holdings Inc. announced that it will be acquired by The Linde Group, a German gases and engineering company. Per the agreement, Linde agreed to buy all the outstanding shares of Lincare in cash for $41.50 per share or $4.6 billion. Linde plans to finance the merger through available cash and an acquisition loan of $4.5 billion.

Offer Price Represents a 64% Premium

Rumors regarding a takeover have been doing the rounds from late June 2012. Initially, the company’s share price shot up 23.4% to $31.17 on June 27 following the rumors and kept increasing thereafter. The offer price of $41.50 per share represents a 64% premium over Lincare’s stock price of $25.26 on June 26, which was the last day before rumors regarding a possible auction process came out.

The acquisition, subject to certain regulatory conditions along with shareholder approval, is expected to close by the third quarter of 2012. After the acquisition, Lincare will be incorporated into Linde as a fully-owned subsidiary.

Acquisition will Significantly Boost Linde’s U.S. Biz

The merger should be accretive for Linde as it will be able to expand its market base significantly especially in the U.S. Following this acquisition, Linde will be able to double sales in its North American Gases business and target the €4 billion U.S. health care market, which is the largest in the world.

Florida-based Lincare is a leading provider of oxygen and other respiratory therapy services to patients at home. The company offers services and equipment to more than 800,000 clients across the U.S. and Canada through 1,091 local outlets. Two-thirds of the €12 billion global health care industry is dedicated to homecare products with an annual growth rate of roughly 6%. The merger will enable Linde to become the global leader in health care offerings within the gases industry.

Prior to the upcoming Lincare acquisition, Linde’s connection with the U.S. was through its Homecare business, which supplied products to other home health care companies in the U.S. Also, Linde’s subsidiary LifeGas has been doing good business with Lincare for several years now.

Linde’s health care division provides medical gas and pharmaceutical offerings for the treatment of a variety of clinical conditions such as aerosol therapy, oxygen therapy, asthma, anesthesia, chronic obstructive pulmonary disease, sleep apnea and pain.

In 2011, Linde’s health care division generated revenues of €1.2 billion. The acquisition is expected to boost this business and produce annual revenues of €2.8 billion on a pro-forma basis.

Some of the other players in the U.S. home health care market are Gentiva Health Services Inc. and Rotech Healthcare Inc. . Lincare Holdings currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.

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