February 6, 2018 / 2:27 PM / in a year

Linde expects bigger antitrust hurdle for Praxair merger

FRANKFURT (Reuters) - German industrial gases maker Linde (LING.DE) said on Tuesday it expected it would have to make more divestments than initially planned to win antitrust approval for its $84 billion merger with Praxair PX.N.

Linde Group logo is seen at a company building in Munich-Pullach, Germany August 16, 2016. REUTERS/Michaela Rehle/File Photo

But Linde said it would not have to sell businesses with revenues and earnings that exceeded the thresholds agreed with Praxair in their deal which aims to create a global leader in industrial gases.

If regulators demanded 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 could withdraw without penalty.

The planned all-share merger of equals was agreed in June. The combined group will overtake the world’s biggest industrial gases group, France’s Air Liquide (AIRP.PA), with total revenue of $28.7 billion and 88,000 staff.

“Discussions with various antitrust authorities have resulted in indications that merger clearance ... will be subject to requirements more onerous than previously assumed,” Linde said.

A spokesman said Linde still expected the deal to be completed by an Oct. 24 deadline.

People close to the matter had told Reuters in October that the two companies were preparing to sell assets with EBITDA of 650 million to 750 million euros. But another source said this year the figure was more likely to be $800 million.

The assets up for sale are expected to be worth a combined 6.5 billion to 7.5 billion euros. The bulk of them are located in the United States and Europe.

The merger partners expect the European Commission to initiate an in-depth phase II antitrust review, as is customary for complex transactions, Linde said.

The latest regulatory hurdle on divestments emerged as Linde is preparing to send information packages, known as IMs, on antitrust-related assets to prospective buyers in coming days, sources familiar with the matter told Reuters.

Several private equity groups are expected to bid, including CVC working with Linde’s smaller rival Messer, as well as Blackstone (BX.N), Carlyle (CG.O), Apollo (APO.N) and Onex (ONEX.TO), sources have said.

Linde wants to ensure its divestments close at the same time as the Linde-Praxair merger, so it would prefer to find one buyer for all its assets, instead of separate buyers for each.

Once European Commission’s investigation starts, it has 90 business days to decide but the procedure allows for delays under certain conditions.

The EU commission declined to outline what conditions should be met to ensure antitrust clearance.

“Our investigation is ongoing. The provisional deadline for the Commission to take a decision is Feb. 16,” it said.

Reporting by Ludwig Burger and Arno Schuetze; Editing by Edmund Blair

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