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Linde-Praxair merger hits antitrust hurdle; talks continue

Published 22/08/2018, 07:52
© Reuters. FILE PHOTO: Linde Group logo is seen at company building in Munich

FRANKFURT/MUNICH (Reuters) - Linde (DE:LIN1) warned that divestments needed to secure approval for its planned tie-up with Praxair (N:PX) have reached a size that would allow either party to abandon the deal, but added it was in constructive talks to salvage the $83 billion (65.08 billion pounds)merger.

The industrial gases suppliers earlier agreed that if antitrust regulators demanded the disposal of businesses with more than 3.7 billion euros ($4.3 billion) in sales, or 1.1 billion euros in earnings before interest, taxes, depreciation and amortisation (EBITDA), either party could withdraw without penalty.

"Linde and Praxair remain in constructive dialogue with each other and the regulators on how to satisfy their requirements," Linde said on Wednesday.

Linde said the revenue threshold for divestiture commitments would be exceeded, without providing details. It had previously warned this was very likely to happen.

Linde shares were down 2.1 percent in pre-market trading after the news, broker Lang & Schwarz said.

Earlier this month, the U.S. Federal Trade Commission (FTC) asked for more assets to be sold than previously anticipated and also said it wanted prospective buyers of these assets to meet certain other requirements.

Investors have been optimistic for the most part that the deal would be pushed over the finishing line nonetheless.

"I'd be surprised if both partners were not determined to do everything they can to see the deal through," said Arne Rautenberg, a fund manager at Frankfurt-based Union Investment, earlier this week.

He added the revenue threshold would likely be exceeded by a few hundred million euros.

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The regulatory challenge is a setback for Linde Chairman Wolfgang Reitzle, who has been a driving force for the deal and had to reshuffle management following the departure of the company's chief executive and finance chief.

The planned all-share merger, agreed in principle in December 2016, would create a global leader in gas distribution ahead of France's Air Liquide (PA:AIRP), which had also bulked up with the takeover of rival Airgas.

The companies face an Oct. 24 deadline to complete the deal under German financial market rules.

The time pressure would put Linde and Praxair in a weak position when negotiating a price with prospective buyers of the assets, analysts have said.

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