Praxair’s $34 Billion Linde Deal Runs Risk of Falling Apart

  • Works council sends letter to staff opposing planned tie up
  • German minister says economic rationale not well presented

Praxair Inc.’s plan to buy German industrial-gas maker Linde AG risks falling apart for a second time after Linde’s works council signaled strong opposition to the $34 billion deal and a government minister questioned its value.

A deal with Praxair will lead to significant job losses, and the combined company will be run from headquarters in the U.S., Linde’s works council, which represents employees in dealings with the company, said in a letter sent to staff Wednesday. The combination will mean an end to the corporate culture at Munich-based Linde, and employees will no longer participate in business decisions, according to the letter.

“The European Works Council members and the workforce will therefore vigorously oppose the planned merger with Praxair," the council wrote in the letter, which was seen by Bloomberg News. “Linde does not need Praxair!”

Linde’s supervisory board will meet next week, when Chairman Wolfgang Reitzle is expected to try to curry favor for the deal, according to a person familiar with the matter who asked not to be identified because the deliberations are private. A spokesman for Linde declined to comment.

The works council letter sets the stage for a showdown as Linde executives aim to get an agreement before the annual shareholder meeting May 10. Half of Linde’s supervisory board, like those of all publicly traded German companies, is composed of worker representatives -- four from the works council and one each from the IG Metall and the IG BCE labor unions. 

Government Criticism

Spokesmen for IG Metall and IG BCE confirmed the unions and the works council are of the same opinion. The IG BCE spokesman said the decision on how to vote is still open.

The deal is also gathering criticism from the German government. Acceptance by the workforce is crucial, Deputy Economy Minister Matthias Machnig said in a statement.

“This is apparently not the case currently,” he said. “Nor, in my estimation, has the economic rationale of such a project been convincingly presented.”

Talks for a merger between the two companies broke down in September over concerns within Linde’s board that jobs and operations would be cut at its headquarters, people familiar with the matter said that month. The discussions were revived in November, leading to a tentative agreement on Dec. 20. The companies, which describe the deal as a merger of equals, said they were targeting a definitive accord “as soon as practicable.”

Jobs Pledge

Praxair spokeswoman Lisa Esneault didn’t respond to a request for comment.

German unions said in December that Linde and Danbury, Connecticut-based Praxair had promised to keep operations in Munich and guaranteed no forced layoffs until 2022. Roughly 8,000 out of 65,000 Linde employees work in Germany.

Click here for details unveiled on Dec. 20 about planned deal.

Linde shares fell 0.4 percent to 156.25 euros in Frankfurt. The deal calls for Linde holders to receive Praxair stock currently valued at 170.44 euros for each of their shares. Praxair climbed 0.1 percent to $118.93.

Linde CEO Aldo Belloni is targeting a merger agreement by the end of April. In a letter to shareholders ahead of the annual meeting, Belloni said it wasn’t clear whether the deal will take place as negotiations weren’t completed.

In the event that the board is split on a decision on the deal, Reitzle could cast a deciding vote, which would be unusual in corporate Germany. Other board members include former Allianz SE CEO Michael Diekmann and Bosch’s Chairman Franz Fehrenbach.

— With assistance by Jack Kaskey

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