Linde Top Executives Leave After Collapse of Praxair Merger

  • CEO Buechele tells board he won’t seek extension past April
  • Finance chief, blamed for blocking deal, leaves immediately

Linde AG is losing its top two executives after the collapse of its planned merger with Praxair Inc.

In a stunning pair of announcements within 20 minutes on Tuesday afternoon, the German industrial-gas company said Chief Financial Officer Georg Denoke was leaving immediately and Chief Executive Officer Wolfgang Buechele wouldn’t seek to extend his contract beyond April.

Maneuvering by Denoke, a 12-year veteran of Linde, contributed to the surprise collapse of the deal, according to people on both sides of the transaction, who asked not to be named because the discussions were private. A weekend of frantic trans-Atlantic conversations between the chief executives couldn’t save the tie-up that would have been valued at more than $30 billion.

After the departure of the executives, Linde could revisit a merger with Praxair down the road because the strategic rationale remains intact, according to people familiar with the matter. No decision has been made, the people said.

Any renewed attempt for a deal could come after a cooling-off period, said these people, who could not be named because the talks are private. The companies had agreed to most of the terms before talks fell apart, the people said. Linde Supervisory Board Chairman Wolfgang Reitzle said another attempt at getting a deal isn’t currently on the table, according to Handelsblatt, citing an interview.

After tumbling 7 percent Monday in the wake of the deal’s failure, shares of Munich-based Linde jumped 4.6 percent to close Tuesday at 144.85 euros after the departures were announced. Praxair, based in Danbury, Connecticut, shed 0.2 percent to $118.32 at 3:25 p.m. in New York trading.

Georg Denoke
Georg Denoke
Photographer: Guenter Schiffmann/Bloomberg

Linde put out a short statement Monday that cited “governance issues” for the failure of the merger. Hours earlier, on Sunday, Linde CEO Buechele told his Praxair counterpart Stephen Angel that the deal was off. Spokesmen for Linde, Praxair, executives including Denoke and union representatives involved in the talks declined to comment.

The supervisory board asked Buechele to remain as CEO until his contract expires in April, according to Tuesday’s statement. A search for a successor will begin immediately, Linde said. Denoke, the CFO, “will leave the management board of Linde AG, effective today,” the company said. His duties in the finance department will be assumed on an interim basis by Sven Schneider, who is head of group treasury, until a successor has been appointed, the company said. A spokesman for Linde declined to comment beyond the statement.

Denoke, who wouldn’t have held the CFO job in the combined company, worked behind the scenes to drum up opposition among the labor representatives on the supervisory board, according to the people. Under German corporate structure, it would have been complicated to either fire the CFO or push through a deal without a majority of the 12-member panel, where representation is equally split between the capital and labor side.

“They hint at issues other than competition that led to the rupture,” said Lars Hettche, an analyst at Bankhaus Metzler. “In such negotiations it’s often a question of power.”

Doomsayer

At stake for the unions, the people said, were jobs and influence within the combined company. Denoke was the principle doomsayer that the merger would spell the demise of a German industrial giant, they said.

With the holding company for the combined entity planned for somewhere in Europe outside Germany and the operational center in Praxair’s hometown of Danbury, Linde sought guarantees for certain operations and jobs to remain at its Munich headquarters. Talks between the CEOs broke down over that issue, the people said.

In a letter to employees, Buechele said he was “very disappointed” about the merger talks failing because the combination made a lot of sense. However, the price of giving up Linde’s independence outweighed the benefits.

“One focus for us was our traditional location in Munich, which for us would have been of central importance in the merged company,” Buechele said in the letter. “A merger would mean achieving a balance between Linde and Praxair on the new company’s structure and headquarters. That point was non-negotiable for me and the other members of the executive board.”

Left Out

Linde and Praxair had been in talks since mid-August on a combination that would have ranked as the biggest deal so far in a wave of industry consolidation triggered by French rival Air Liquide SA’s takeover this year of Airgas Inc. for $13 billion including debt.

They had broadly agreed that Praxair’s Angel would run the combined company. Linde Chairman Reitzle -- previously the CEO -- would keep his title, with CEO Buechele as president, the people said. The chief financial officer would have come from Praxair, leaving Denoke without a meaningful role. He enlisted the union’s help in safeguarding his job in exchange for scuppering the deal, the people said.

Even before the merger talks, animosities had flared in the executive suite, according to German media reports this year. Denoke clashed with his CEO, in part over the timing of profit revisions, forcing other managers to intervene and defuse the situation, Manager Magazin reported in February. Reitzle confirmed conflict among managers was blocking decisions, according to the Handelsblatt interview. Denoke joined the company in 2004, whereas Buechele came a decade later, after spending most of his career in the chemicals industry at BASF SE.

Reinvention

The deal would have been the crowning achievement for Reitzle, who spent a decade orchestrating one of Germany’s more notable corporate reinventions. By jettisoning the forklift and refrigeration units that used to be Linde’s focus, he oversaw $22 billion in acquisitions to remodel the company into a global industrial-gases behemoth, moving it south to Munich from Wiesbaden, a sleepy spa town near Frankfurt, in the process and tripling the share price.

After stepping down in 2014 when he reached the mandatory retirement age of 65, Reitzle took on the chairmanship of Swiss cement maker Holcim Ltd. where he helped broker a $35 billion cement merger with Lafarge SA.

Legacy

Bringing the combination with Praxair to completion would have cemented Reitzle’s legacy as well as making Linde bigger at a time when industrial gas makers are seeking new revenue streams and better margins amid slowing growth in China and weaker demand from steel, oil and natural gas customers.

“Over time, Linde could be open to other transactions which could include asset
swaps or joint ventures,” Morningstar analyst David Silver said by telephone after the executive departures. The management changes at Linde pave the way for “a new management team whose interests are aligned with Reitzle and the supervisory board.”

Reitzle, in the statement Tuesday announcing Buechele’s departure, said the company will move ahead without Praxair. “Linde will now redouble its focus on its core markets and expand the company’s competitive position based on its considerable inherent strengths,” he said.

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