German industrial gases group Linde (LING.DE) and U.S. rival Praxair (PX.N) have ended talks to create a $60-billion-plus market leader, they said on Monday, after failing to agree where to locate key activities and who would run the business.
Although the logic of the deal was clear, the talks foundered on where the combined firm would have its headquarters and research and development, and who would occupy the main management roles, three sources familiar with the matter said.
One of the sources said the two chief executives had on Sunday “agreed to disagree” and dropped the plan to create a rare merger of equals.
Linde shares dropped 7 percent to 138 euros, below the price at which they were trading just before news of the talks emerged last month.
“While the strategic rationale for a merger has been principally confirmed, discussions about details, specifically about governance aspects, did not result in a mutual understanding,” Linde said in a statement.
A top 10 shareholder who asked not to be named because he was not authorized to speak to the media said it was disappointing that the deal had fallen through but he could understand the reasons and Linde was a strong company that could stand alone.
“It’s not a situation where the company is in danger,” he said, adding that Linde could offer other measures such as share buybacks to support the stock price. His firm had not been consulted about the mooted merger, he added.
Asked about other possible combinations of Linde with a competitor, he mentioned U.S.-based Air Products (APD.N) or China’s Yingde Gases Group (2168.HK) as possible partners, but added: “There aren’t many options anymore.”
France’s Air Liquide (AIRP.PA) is still digesting its $13 billion acquisition of U.S. rival Airgas, which it completed in May. Any quick move by Air Products would be seen by Linde as too opportunistic, one banker said.
The industrial gases sector is already strongly consolidated, as slower economic growth has weakened demand for the manufacturing, metals and energy sectors, putting pressure on smaller players.
A Linde-Praxair deal would have had a good chance of passing an anti-trust regulation in the United States, analysts believed, with Linde’s strong position in healthcare complemented by Praxair’s focus on industry.
Munich-based Linde supplies gases to hospitals and patients with respiratory disorders in North America, as well as industrial gases worldwide, while Danbury, Connecticut-based Praxair focuses on industrial on-site production.
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