Praxair and Linde's merger would face major antitrust hurdles

Tue Aug 16, 2016 7:45pm EDT
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By Diane Bartz

(Reuters) - Praxair Inc's contemplated merger with Linde AG 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.

"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 $45 billion purchase of Cigna, Aetna’s $33 billion acquisition of Humana, and U.S. oilfield services provider Halliburton Co's $34.6 billion acquisition of Baker Hughes Inc.

Consolidation in industrial gases, including Air Liquide SA's $13 billion acquisition of Airgas in May, has left Air Liquide, Linde, Praxair and Air Products and Chemicals Inc 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.   Continued...

Linde Group logo is pictured close to a traffic sign near its headquarters in Munich, Germany August 15, 2016. Picture taken on August 15, 2016.  REUTERS/Michaela Rehle