US gas company Praxair is in talks to acquire Linde, a German rival, which would create the world’s largest supplier of industrial gas with a combined market capitalisation of more than $60bn.
Linde confirmed it was in preliminary talks about a potential merger in a brief statement on Tuesday. Discussions were ongoing and had “not resulted in any concrete results or agreements yet,” it said. “Accordingly it is currently not foreseeable whether there will be any kind of transaction.”
Any deal is likely to face significant antitrust scrutiny given its potential size. Regulators in Europe and America have become increasingly vigilant about enforcing competition rules, following a number of mega mergers in the energy, healthcare and industrial sectors among others.
Linde shares were among the best performing among major European stocks on Tuesday, rising 10.8 per cent to €1.54.
The share price of Praxair, which is based in Danbury, Connecticut, rose 5.4 per cent to $124 in New York trading. The Wall Street Journal first reported the potential combination with Linde.
Talks between the Munich-based group and US company come less than a year after France’s Air Liquide agreed to acquire Airgas, its American rival, for about $13.4bn.
The Franco-American deal was approved in May this year after it obtained all the necessary regulatory approvals. A person familiar with the matter said that the regulatory approval of Air Liquide’s acquisition of Airgas triggered the confidence of Praxair’s management that it could successfully take over Linde.
Industrial activity in the US and Europe has been resilient despite an economic slowdown in China. But the sharp combined fall in commodity prices has weighed on demand for industrial goods across key sectors.
Such pressures in the industrial sector have led gas suppliers to consolidate in a broader effort to cut costs and boost revenues through new synergies.
A combined Praxair-Linde would generate more than $30bn worth of revenues, according to Capital IQ data.
Praxair, which employs nearly 27,000 people, sells its gas products to companies across the globe in a variety of sectors, including healthcare, petroleum refining, manufacturing and water treatment.
Linde for its part employs more than 65,000 workers and specialises in selling compressed and liquefied gases for use in steel and glass production; chemical and food processing; and welding among others.
Any combination is likely to lead to lay-offs as the two companies will try to cut costs by reducing the number of workers carrying out the same roles, as has been common in similar deals.
Get alerts on Linde AG when a new story is published