Linde sells $3.3bn in assets to Messer and CVC

September 2018 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

September 2018 Issue

A joint venture between German industrial gas supplier Messer and private equity group CVC has agreed to acquire the majority of Linde AG’s gases business in North America and certain business activities in South America for around $3.3bn. The deal should allow Linde to secure antitrust clearance for its planned $87bn merger of equals with US rival Praxair.

The joint venture will be known as MG Industries and will operate under the Messer brand. The businesses to be sold in the deal include almost all of Linde’s US bulk business, as well as the company’s operations in Brazil, Canada and Colombia. The joint venture is believed to have beaten a number of rivals, including financial investor Carlyle which was considered the front runner for Linde’s assets.

The assets being acquired have around 5100 employees, and generated revenues of $1.7bn and earnings before interest, tax, depreciation and amortisation (EBITDA) in excess of $360m in 2017. Messer will transfer its western European operations, which includes businesses in Benelux, Denmark, France, Germany, Portugal, Spain and Switzerland, and which accounted for €334m of the company’s €1.23bn group sales, into the new entity. Messer, which increased its revenue by 7 percent to €1.2bn in 2017, will essentially double in size as a result of the deal, 14 years after it left the US market after selling its US operations to Air Liquide in a restructuring.

“In creating this strategic partnership, we are seizing a unique opportunity to return to the North and South American markets and create a global player in the industrial gases sector,” said Stefan Messer, owner and chief executive of the Messer Group. “Through our industry expertise and strong engineering and application know-how, as well as the operational expertise and global network provided by CVC, we will continue to grow the acquired businesses together with its highly experienced and motivated employees.”

“This is an exciting opportunity to create a new global player in the attractive industrial gases sector,” said Alexander Dibelius, managing partner and head of DACH at CVC. “We are delighted to be partnering with Messer and the Messer family with whom we have a long-standing, trusted relationship for years. Their engineering competencies and application know-how will, amongst others, be critical aspects in further growing the acquired businesses in the future.”

The deal came about as a result of antitrust concerns on both sides of the Atlantic. Competition authorities in the European Union opened an in-depth, or ‘phase two’, investigation into Linde’s proposed merger with Praxair in February. Regulators were concerned that the deal, which was announced in 2016, could harm competition for gases, such as oxygen and helium, as the merger would cut the major gas producers in Europe to just three. Though negotiations with antitrust authorities are ongoing, Linde and Praxair hope that the deal will win approval in the second half of 2018. The sale to the joint venture will bring Linde and Praxair’s combined divestitures to more than $9bn, including the sale of Praxair’s industrial-gas plants in Europe to Taiyo Nippon Sanso Corp. for $5.8bn. The combined Linde/Praxair would create a global leader in gas distribution ahead of France’s Air Liquide.

The US Federal Trade Commission (FTC) is one of the few remaining regulatory bodies yet to offer an opinion on the transaction. Gaining FTC approval would be a significant step for Linde and Praxair as the US market is believed to be the most significant area of overlap for the deal. As the combined Linde/Praxair entity would have projected sales of approximately $12bn in the Americas and a market share in excess of nearest rival Air Liquide, the new company would be expected to make three to four times larger divestitures than Air Liquide and Airgas had to make in 2016 to complete their $10bn merger.

Richard Summerfield