EU starts in-depth investigation of Linde-Praxair merger over competition concerns

The Linde Group Logo (Source: The Linde Group website, Press Services, 2018)

The Linde Group Logo (Source: The Linde Group website, Press Services, 2018)

The European Commission has opened an in-depth investigation to assess a proposed merger between German industrial gases group Linde and US peer Praxair Inc., under the EU Merger Regulation. The official announcement came last Friday, as the Commission said it has concerns “that the merger may reduce competition in the supply of several crucial gases, like oxygen and helium”. The proposed $85 billion deal, announced in December 2016, would indeed create the world’s largest industrial gas-maker ahead of France’s Air Liquide, with a total expected revenue of $28.7 billion and 88,000 staff.

Background

It was December 20, 2016 when two of the world’s leaders in the industrial gases industry announced the intention to merge and create the largest company of the sector in the world. A Munich, Germany – Danbury, Connecticut joint press release was quoting Steve Angel, Praxair’s Chairman and CEO saying that the merger was expected to leverage the complementary strengths of each company, and to create “a more resilient portfolio with increased exposure to long-term macro growth trends”. “We consider this to be a true strategic merger, as it brings together the capabilities, talented people and best-in-class processes of both companies, creating a unique and compelling opportunity for all of our stakeholders”, Mr. Angel said at the end of 2016.

Bumpy road

However, the merger had to face a bumpy road until it got to its final shape. It already collapsed in late 2016 after Linde’s workers rallied against it, and had to face tough times again in early 2017 as labour unions were threatening to block it. A new deal with better terms for German workers then emerged and so it could go ahead, until the two companies spoke publicly again, with a special mention to the next, big, test: an antitrust investigation by the European Commission.

“In the course of the antitrust proceedings in the European Union, Linde and Praxair will not submit final commitments to the European Commission in this first investigation phase (phase I)”, Linde AG announced through an official statement published earlier this month. “Therefore, the merger partners expect that the European Commission will initiate an in-depth investigation (phase II)”, Linde added.

“In-depth investigation”

Linde’s forecast was indeed about right. Last Friday, the European Commission announced it was going ahead with an in-depth investigation into the proposed merger between the two giants of the industrial gases industry, over fears that the proposed transaction would “reduce the competitive pressure in markets covering a significant part of the activities of Praxair and Linde”. In particular, the Commission’s initial market investigation raised competition concerns for the supply of industrial gases, medical gases (and related services), speciality gases, as well as the supply of helium.

The Commission said that, after a first market investigation, only the four main players of the industrial gases industry have the engineering capabilities necessary to bid for the largest tonnage projects (i.e. the construction of dedicated gas production units on customer manufacturing sites). According to the Commission, the investigation also confirmed that only they have the necessary access to sources of helium worldwide to be competitive.

Reduction of major players

For these reasons, the Commission believes that the reduction of the major players from four to three would significantly deteriorate the customers’ ability to “obtain critical inputs and products” at competitive prices. Moreover, the European Commission says there is no indication that competition could be fostered by new entrants, due to the very high investment necessary to establish a meaningful position in the market after a Linde-Praxair merger.

Commissioner Margrethe Vestager, responsible for competition policy, said: “Gases – like oxygen and helium – are crucial inputs for a large variety of products we use every day. Manufacturers need to buy these gases from a small number of suppliers. We will carefully assess whether the proposed merger between Praxair and Linde would lead to higher prices or less choice for European consumers and businesses”.

Agreed threshold

The proposed Linde-Praxair merger has seemingly no easy road ahead again. The two merging companies have agreed that either can walk away from the deal without penalty if the regulators’ demand of business disposal would result to be too high for them. On the statement published earlier this month, Linde said that discussion with antitrust authorities has resulted in indications that merger clearance of the business combination with Praxair will be subject to requirements “more onerous than previously assumed”.

The statement reported that the two companies agreed on a sort of “pain threshold”, up to which a merger would no longer make sense. If regulators demand the disposal of businesses with more than $3.7 billion in sales or $1.1 billion in earnings before interest, taxes, depreciation and amortization (EBITDA), either party can withdraw without penalty.

Next steps

The proposed Linde-Praxair merger has seemingly no easy road ahead again. The Commission said it had 90 working days, until July 4, to take a decision, as well as it underlined that the opening of an in-depth investigation does not prejudge the outcome of the investigation.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Diversity training doesn’t change people’s behaviour. We need to find out what does

Can Kiev make face to mounting economic problems and social unrest?

FROM THE FIELD: Enslaved Guatemalan indigenous women wait for reparations

EU adopts rebalancing measures in reaction to US steel and aluminium tariffs

Women’s rights in Asia – how far have we come?

The “Legend of the Sun” wishes you Happy Chinese New Year 2015 from Brussels

Humanitarian emergency in Venezuela was central debate of the EuroLat plenary

5 charts that explain big challenges facing Italy’s new government

Portugal: Budget MEPs back €4.66 m in job-search aid for 730 redundant workers

The US calls off globalization, targets Germany. Paris offer to Berlin comes at a cost

Does the world have strong enough institutions to handle risks like Trump and Brexit?

Safer products: stepping up checks and inspections to protect consumers

The Oslo model: how to prepare your city for the electric-vehicle surge

Statement by the Brexit Steering Group on UK paper on EU citizens in the UK

The European Sting @ Mobile World Congress 2014, Creating What’s Next for the World. Can EU Policy follow?

The big challenge of leadership and entrepreneurship in Europe

ECB settles the bank resolution issue, makes banking union tangible

Close to 7,000 evacuated from Syrian towns after enduring nearly 3-year siege

Irish Presidency: Not a euro more for EU budgets

Brussels wins game and match in Ukraine no matter the electoral results

Trump asked Merkel to pay NATO arrears and cut down exports ignoring the EU

A skills gap is jeopardizing efforts to end energy poverty

Will the EU ever tackle the migration crisis despite the lack of political will?

Euronest: delivering reforms is the best way forward for EU’s Eastern Partners

More solidarity and interaction between generations needed to challenge age stereotypes and ingrained ageism

EU’s Mogherini visits Turkey “to step up engagement” and highlight interests

Adolescent health has been overlooked for too long

The movement of anti-vaccers: taking humanity back 200 years

EU fundamental rights under threat in several member states

Bayer’s cross at night (Copyright: Bayer AG)

The EU clears Bayer-Monsanto merger amid wide competition and environmental concerns

Air pollution, the ‘silent killer’ that claims seven million lives a year: rights council hears

Is the English language too powerful?

This AI outperformed 20 corporate lawyers at legal work

Canada and EU officially sign the trade agreement that could open-up the road to TTIP

The EU pollution rights trading system frozen

High unemployment to continue haunting the EU

Draghi tells the EU Parliament his relaxed policies are here to stay

The countries with the most satellites in space

German and French bankers looted the Irish and Spanish unemployed

UN commission agrees roadmap on ensuring women’s social protection, mobility, safety, and access to economic opportunities

Plan for troop pullback ‘now accepted’ by rival forces around key Yemen port, but fighting intensifying elsewhere, Security Council warned

What cryptocurrencies will do to the integrity of politics

Can the Americans alone determine the future of Syria?

Heat-resistant crops, ‘green’ infrastructure, can prepare Near East and North Africa to better tackle droughts – UN agency

China repels EU allegations of export subsidies

EU: Turkey to shelter Syrian refugees and turn other immigrants back in return of €3 billion

A European young student shares his thoughts on Quality Education

A Sting Exclusive: EU Commission’s Vice President Šefčovič accentuates the importance of innovation to EU’s Energy Union

UN, Egypt help avert another Israel-Palestine war in Gaza that was ‘minutes away’, Security Council hears

2014 budget: The EU may prove unable to agree on own resources

Global Citizen – Volunteer Internships

Cyprus President urges collective leadership to address ‘root causes’ of world’s crises

UN refugee agency presses States to aid 49 refugees stranded on Mediterranean

Large parts of the world are growing more fragile. Here are 5 steps to reverse course

Security Union: political agreement on strengthened Schengen Information System

Reintegrating former rebels into civilian life a ‘serious concern’ in Colombia: UN Mission chief

GSMA Announces New Speakers for Mobile 360 Series – Middle East and North Africa

Are the G20 leaders ready to curb corporate tax-avoidance?

The Syrian knot cannot be cut without devastating consequences

MWC 2016 LIVE: The top 5 themes of this year’s Mobile World Congress

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s