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Linde Buys European Unit of Air Products for $751 Million

Linde AG, the world’s second-biggest supplier of industrial gases, agreed to buy a European business from Air Products & Chemicals Inc. for 590 million euros ($751 million) to expand its health-care operations.

The home care business, which supplies oxygen to patients, generates 210 million euros in annual sales from sites in Belgium, France, Germany, Portugal and Spain, the Munich-based company said in a statement. Linde will almost double sales from this product area, making the German company among Europe’s top suppliers of home care respiratory products.

Linde plans to use the home care division as a springboard to reach an additional 260,000 patients receiving care outside of hospitals. The company is paying 2.81 times sales, based on the enterprise value. That compares with a median of 2.72 times sales for European industrial gas deals in the last 10 years, according to data compiled by Bloomberg.

“I’m a bit surprised by the multiple,” said Thorsten Strauss, an analyst at NordLB in Hanover, who has a “hold” recommendation on Linde. “It’s hard to expand in industrial gases, so this is clearly a strategic price.”

The transaction would be the largest completed deal in industrial gases in more than four years, data compiled by Bloomberg show.

Air Products Divestment

For Air Products, based in Lehigh Valley, Pennsylvania, the transaction highlights a strategic reassessment of home care assets in the U.K., Ireland, Argentina and Brazil. “Several options” for these assets are being assessed, it said. The company has been divesting units to focus on more profitable products.

“Home care is an attractive business that is growing faster than other health care segments and is very defensive,” said Juergen Reck, an analyst at Macquarie Group Ltd. in Frankfurt.

“The business is determined by high transportation costs, and a higher density of patients in a region means profitability will clearly rise,” Reck said. “This deal will clearly strengthen Linde’s portfolio.”

Reck has an “outperform” recommendation on Linde stock and predicts that it will rise to 122 euros within a year. The shares fell 0.9 percent as of 3:47 p.m. In Frankfurt, paring their 12-month advance to 8.8 percent.

“Health care is one of our three strategic growth pillars,” Linde Chief Executive Officer Wolfgang Reitzle said in the statement. “It has proven to be a stable business and builds on the megatrend of changing demographics.”

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