The stakes are high for Aldo Ernesto Belloni. Lured out of retirement in December to complete the mega deal between German chemical group Linde and Praxair of the US, the new chief executive of the Munich-based company may on occasions yearn for the quieter life of a pensioner.
The merger has already collapsed once and claimed the jobs of Linde’s former chief executive and finance director. Now, as Mr Belloni races to seal the terms of the deal before the German group’s annual meeting on May 10, antitrust concerns and unrest from trade unions pose a threat to the tie-up.
“Not being able to communicate [the signing of the formal merger] on that day would be very embarrassing for all of us and it would disappoint the people,” he admits in an interview at Linde’s headquarters.
If the two companies can join forces, the rewards could be high as the merger would create a global leader worth $65bn that could capitalise on “mega trends” in society and industry, from an ageing population to the challenges of renewable energy, he says.
But first, he must deal with the competition issues and the unions.
Analysts at Bernstein have estimated that the enlarged Linde would hold 40 per cent of the global market in industrial gases. In some countries, it would be so big that regulators are almost certain to intervene.
Meanwhile, Jürgen Wechsler, head of the metalworkers’ union IG Metall in Bavaria, recently came out against the merger, saying he was worried about job losses and questioning whether the deal was truly a “merger of equals”, given Praxair’s larger size. “Linde doesn’t need Praxair,” he said.
If Mr Belloni, an affable 67-year-old Italian who emerged from retirement to take charge on December 8 after a 35-year career with Linde, is ruffled, he does not show it.
He expressed confidence that the group could pre-empt antitrust worries by disposing of certain assets where their presence is too large. Analysts say this would be in the US, Brazil, Spain and Italy.
Praxair, which is more specialised and attains higher margins, will maintain its dominant role in North America and Brazil, while Linde will keep its stronghold in Europe and Asia. But Mr Belloni says “sacrificial lambs” will be offered so the authorities are presented with a plan that preserves competition.
He acknowledges that labour unrest has been a source of annoyance, given the board’s preapproval of the deal in December. But he thinks the problem is merely a lack of information. Linde employs 65,000 people in more than 100 countries, with just 11 per cent of them in Germany. “The merger won’t happen at the cost and detriment of the German workforce and locations,” he says.
“There is this sense of losing a German jewel, that’s the fear,” Mr Belloni adds. “In the recent past there have been acquisitions of German technology, and we do not want to be associated with that. It’s a totally different thing. We are partners in a merger of equals.”
The merger is important in an industry that is not well understood but which plays an “all-pervading” role across society, industry and in medicine, he says.
“If you eat and handle food, you’re touching us,” Mr Belloni adds. “We do a lot of things where you don’t see us because we are not at the customer touch point, but we are in the second row of an infinite array of industries.”
Mr Belloni rattles off a number of examples where Linde plays a part — drilling for oil and providing healthcare, but also conserving sperm and oxidising shrimp. “Your frozen pizzas have to be ‘shock frozen’ with liquid nitrogen,” he says. “The materials in your car have been produced by chemical and steel companies that require our products. Even rockets are propelled by hydrogen that we provide.”
With Praxair, the enlarged company could save €1bn a year in reduced costs and synergies.
That would help propel Linde to capitalise in areas such as respiratory chemicals, where Mr Belloni sees the potential for demand to “increase exponentially” as society ages. Given the long-term demise of combustion engine cars, Linde has also built 160 hydrogen fuel stations to prove fuel cell technology could be “a major business model” to compete with battery-driven cars.
Mr Belloni adds that he is “absolutely convinced” Linde can play a role in energy storage for renewable sources. “The wind is not always blowing, but the demand is very constant,” he says. “So you need a buffer in between, and we have technology which can address this.”
However, there are still risks for the merger, which was only back on in December after talks between the companies failed in September when labour unions voted the deal down. The collapse surprised Praxair and threatened the dealmaking reputation of Linde chairman Wolfgang Reitzle. As a result, heads rolled with the departure of the top executive and finance chief, prompting Mr Belloni’s return.
Coming out of retirement is clearly a gamble for the Italian, but hopes are high that he can rise to the challenge and complete the merger without any hitches before handing over the reins to Steve Angel, Praxair chief executive. “I’m the ferry man,” he says. “I’m transporting the company into a new era.” Only then, will he be able to contemplate the quieter life of retirement.
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