Linde, Praxair Kick Off $8 Billion in Asset Sales

Updated on
  • Air Liquide, Messer-CVC eyeing bids for industrial gas assets
  • Matheson, Air Products, KKR and Carlyle also interested

A worker maneuvers an empty canister inside the Linde AG compressed gas plant in Marl, Germany.

Photographer: Jasper Juinen/Bloomberg

Linde AG and Praxair Inc., awaiting regulatory approval for their combination, have started the sale of European and U.S. industrial gas assets that may fetch about $8 billion, according to people with knowledge of the matter.

The portfolio is attracting interest from rivals such as Air Liquide SA, Air Products & Chemicals Inc., Germany’s Messer Group GmbH and Taiyo Nippon Sanso Corp.’s Matheson Tri-Gas unit, said the people, who asked not to be identified because the talks are confidential. Private equity firms including KKR & Co. and Carlyle Group LP are also weighing bids, they said. Buyout firm CVC Capital Partners is working with Germany’s Messer, they said.

The European and U.S. assets currently on the block generated almost $700 million in earnings in 2016, and are typically valued at 10 to 12 times that amount, the people said. The final valuation could change if more assets are added to appease antitrust regulators, the people said.

The size of operations on sale are a fresh sign of the close scrutiny by antitrust regulators on deals that leave a handful of behemoths dominating a critical market. Linde warned last month that its $52 billion merger with Praxair faced “more onerous” requirements from watchdogs globally than the firms had previously assumed. Other transactions in the chemical industry -- including Bayer AG’s $66 billion proposed takeover of Monsanto Co. -- have also come under pressure to make bigger divestments.

Larger Sale

“The proposed divestitures are slightly larger than we expected,” Laurence Alexander, an analyst at Jefferies who rates Linde as a buy, said in a note Thursday. “One or more JV partnership structures appear likely, as well as possibly splitting off certain parts of Europe, in order to efficiently deal with existing regional overlaps.”

Shares of Linde dropped 2.1 percent to 175.85 euros amid a broader selloff in Germany’s benchmark DAX Index as of 10:14 a.m. on Friday in Frankfurt. Praxair closed 1.2 percent lower on Thursday at $147.92 in New York.

Preliminary information about the assets was sent out in the second half of February to prospective buyers, who have the option to bid for the complete package or for parts, said the people.

Ticking Clock

The clock is ticking for Linde and Praxair, which agreed to an October deadline for getting all the relevant approvals. The European Commission last month said a ruling would be issued by July 18.

A Messer representative said his firm has teamed up with CVC to look at some of the assets. Air Liquide’s Chief Executive Officer Benoit Potier last month signaled his interest in assets that Linde and Praxair divest, while a spokesman this week said the French company looks at opportunities “on a case-by-case basis,” without providing any specifics. A representative for Taiyo Nippon Sanso said nobody was immediately available to comment. Spokesmen for Linde, Air Products, Praxair, Carlyle, CVC, Matheson and KKR declined to comment.

Praxair CEO Steve Angel said Jan. 25 that he didn’t think a threshold set by the companies for how many assets they would be prepared to sell off “is going to be threatened.” Linde reiterated that view in its Feb. 6 statement. Angel and Linde’s CEO Aldo Belloni are seeking a balance between offloading assets to remove potential overlaps while simultaneously safeguarding the rationale of the deal.

Air Liquide, the largest industrial-gas supplier, completed its biggest deal two years ago with the $13 billion acquisition of Airgas Inc. Combining Linde and Praxair -- the world’s next-biggest providers -- would leave three major companies, including Air Products.

— With assistance by Sarah Syed, Jack Kaskey, Ania Nussbaum, Andrew Marc Noel, and Kiel Porter

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