Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Praxair and Linde's merger would face major antitrust hurdles

Published 17/08/2016, 00:52
Updated 17/08/2016, 01:00
© Reuters. Linde Group logo is pictured close to a traffic sign near its headquarters in Munich

© Reuters. Linde Group logo is pictured close to a traffic sign near its headquarters in Munich

By Diane Bartz

(Reuters) - Praxair Inc's (N:PX) contemplated merger with Linde AG (DE:LING) would cut the number of global industrial gas suppliers to three from four, posing antitrust challenges and drawing scrutiny from regulators wary of more mega deals.

Antitrust experts said the companies, which announced they were in early-stage talks on Tuesday, would likely have to agree to divestitures to create the world's largest industrial gas company with a market value of more than $60 billion (46.01 billion pounds).

"It does strike me as a deal that will prompt serious antitrust scrutiny. Antitrust enforcers will want to look at submarkets," said Seth Bloom, formerly of the U.S. Department of Justice's Antitrust Division and now in private practice.

Antitrust authorities have been flexing muscle regarding transformative mergers. Deals they have challenged include Anthem’s (N:ANTM) $45 billion (34.50 billion pounds) purchase of Cigna (N:CI), Aetna’s (N:AET) $33 billion (25.30 billion pounds) acquisition of Humana (N:HUM), and U.S. oilfield services provider Halliburton Co's (N:HAL) $34.6 billion (26.53 billion pounds) acquisition of Baker Hughes Inc (N:BHI).

Consolidation in industrial gases, including Air Liquide SA's (PA:AIRP) $13 billion acquisition of Airgas in May, has left Air Liquide, Linde, Praxair and Air Products and Chemicals Inc (N:APD) providing most of the oxygen, nitrogen, argon and other gases to industries ranging from oil companies to drugmakers.

Air Liquide has 29 percent of the U.S. industrial gas market, Praxair has 21 percent, Linde has 15 percent and Air Products has 14 percent, according to the most recent annual data from industry news provider gasworld Business Intelligence. A merger of Praxair and Linde would create a sector leader with 36 percent of the U.S. market.

The story is similar in Europe, where Air Liquide has 32 percent of the market, Linde has 30 percent, Air Products has 13 percent and Praxair has 7 percent, according to gasworld.

Such market shares would give regulators on both sides of the Atlantic pause, antitrust experts said. Praxair and Linde will likely have to review their business with regulators market by market, in regions as small as one metropolitan area, experts said.

"There will be a settlement offer, and the question will be whether the U.S. Federal Trade Commission (FTC) thinks it's enough," said Ethan Glass of the law firm Quinn Emanuel Urquhart and Sullivan LLP, who argued for the U.S. Department of Justice as it sought to stop Electrolux AB (ST:ELUXb) from buying General Electric Co's (N:GE) appliance business.

Air Liquide's acquisition of Airgas offers some insight into the scrutiny to be expected. When the U.S. Federal Trade Commission reviewed the deal, it required a divestiture of assets to preserve competition for dry ice in the San Francisco Bay area.

Adding to the uncertainty are questions over the FTC's composition next year. The final decision on antitrust clearance will likely be made by the next administration, since a new U.S. president will take office in January and a major antitrust review can last a year.

The FTC, which normally has five commissioners, currently has three: two Democrats and a Republican.

© Reuters. Linde Group logo is pictured close to a traffic sign near its headquarters in Munich

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.