Praxair (NYSE:PX) is no longer seeking to merge with industrial gases group Linde, according to an announcement made on Monday. The combination would have created the industrial gas industry’s largest player. Linde is the global leader by revenue, with a market value of about $31 billion. Praxair confirmed in a one-sentence statement that the talks had been terminated.
The prospect of a merger arose two years ago, but talks were halted after Linde issued profit warnings in October and November of last year. News of the renewed talks emerged last month. The companies previously agreed on a 50/50 exchange ratio with Praxair’s Mr. Angel as leader of the combined entity. Linde’s supervisory board chairman Wolfgang Reitzle was expected to become chairman of the merged company.
The companies said the talks failed because an agreement could not be reached on where to locate key activities, such as its headquarters and research and development, and who would run the business in the main management roles. The two chief executives decided to drop the plan after they “agreed to disagree” on the matters.
Big strategic decisions in Germany require the support of a supervisory board half-filled by employees and Linde may not have had enough support for the deal within its own ranks. Linde’s leadership felt uncomfortable with a merger, according to two people familiar with the matter.
Merger talks between Linde and Praxair had propelled the shares of both companies. The move would have resulted in more than $1 billion in annual synergies and a more balanced business profile. Linde shares fell more than 8 percent in early trading Monday, reaching their lowest level in a month.
A Linde-Praxair deal would have had a good chance of passing anti-trust regulation, since they serve different industries. German industrial gas company Linde supplies gases to hospitals and patients with respiratory disorders in North America, and distributes industrial gases worldwide. Praxair, based in Connecticut, focuses on industrial on-site production.
Consolidation across the industrial gas sector has accelerated in recent months. France’s Air Liquide completed its acquisition of U.S. rival Airgas in May. That transaction returned the Air Liquide to the industry’s top spot. The top four global industrial gas companies now control more than 75 percent of the industrial gases market.
Slower economic growth has weakened demand in the manufacturing, metals and energy sectors. Both Praxair and Linde are seeing their sales decline. However, Praxair is much more profitable than Linde. Linde must now create a plan to boost earnings as a standalone company.