The proposed merger of Linde and Praxair would create the largest industrial gas company in the world, controlling 32% of the global market. However, the merger could face significant anti-trust issues in several major markets. In the US, their combined market share of 34% in industrial gases would likely require divestments. Brazil may also require divesting Linde's 60% share of the bulk liquid market. While the merger has benefits, the different management styles between German-centered Linde and customer-focused Praxair could make integration difficult. Regulators will need to examine the merger's potential effects on competition in both regional bulk gas and packaged gas markets to identify any monopolies.

1. 1
Industrial Gas Business
Success
Linde Praxair Merger
The Devil is in the Detail
Keith Guy & Josef David

2. 2
Excellent Territorial Fit but Management Issues
The potential merger of Praxair and Linde would create the largest industrial Gas
company in the world subject only to divestments for anti-trust issues with 32% of
global business
The merged Air Liquide/Airgas business would be about 23% of global business.
The next company of any size would be Air Products with about 12%. In the space of
less than a year the oligopoly of 5 large players shrinks to 3.
This has severe implications for users making enquiries for new gas volumes.
Anti-Trust Issues
The global picture is less relevant than the regional or local issues see table below:
A quick examination of the above regions shows potential anti-trust issues in North
and South America and South Pacific Rim.
However, when we look on a country basis the following countries could be
problematic:
Linde Praxair Combined Air Liquide Airgas Combined
Air
Products Others
North America 13% 25% 38% 12% 11% 23% 18% 21%
USA 13% 21% 34% 11% 14% 25% 19% 22%
Mexico 13% 43% 56% 0% 0% 0% 23% 21%
South America 21% 40% 61% 16% 0% 16% 7% 16%
Brazil 15% 60% 75% 13% 0% 13% 9% 3%
Western Europe 29% 8% 37% 36% 0% 36% 14% 13%
Germany 39% 12% 51% 38% 0% 38% 9% 2%
MEA 21% 6% 27% 10% 0% 10% 4% 59%
Indian Sub Continent 23% 20% 43% 5% 5% 8% 44%
North Pacific 7% 5% 12% 12% 0% 12% 10% 66%
China 14% 8% 22% 7% 0% 7% 9% 62%
South Pacific 39% 3% 42% 22% 0% 22% 12% 24%

3. 3
 USA - the combined 34% market share is very significant and would justify a
regional and line of business analysis to avoid local or product monopolies.
 Mexico the combined 56% market share seems unacceptable but much of
this is caused by large onsite plants for EOR and Praxair’s already dominant
position in the cylinder gas market. Hard to resolve.
 Brazil – Praxair has a dominant position in all products with a 60% market
share. Linde has a significant position in the Bulk liquid market 25%, a total of
85% which is unhealthy and should be at least partially divested
 China – businesses are highly regional and the Chinese government appears
happy with the inward investment
 South Pacific – Although the combined Linde/Praxair total is 42% there
appears to be no specific issues on a country basis and Praxair’s 3% is
mainly in Thailand but is in a different product line to Linde’s and therefore
unlikely to be a problem.
Strategic Focus and Operating Issues
The biggest area of concern in the merger is the general focus and management
style of the two companies.
Previous acquisitions by Linde of Aga and BOC have not gone smoothly because of
these issues.
 Praxair
o US management style - US centred but delegating
o Customer focused through Key Accounts with Key Account Managers
o Rigid and consistent financial analysis methods and no offer can be
made that does not meet financial targets
o Management often bought in even at senior level
o Small engineering group for major equipment which rarely supplies
anybody outside the Praxair Group
o May lack experience is some really large plants

4. 4
 Linde
o German management style – Munich centred and controlling
o Technology focused in belief that customers will buy the best
technology
o Inconsistent attitude to Key account managers
o Financial analysis methods unclear and appear inconsistent with US
methods. Linde pricing is often viewed by customers as inconsistent.
o Management mainly grown from internal sources and mainly
engineers.
o Major engineering group producing up to 20% of revenues and “selling”
plans internally to gases group. Clear drag on corporate profits during
economic downturns. Market leader in technology for Air Separation
and own plants for hydrogen.
Whilst the benefits to Praxair of better technology are significant, the financial and
management styles of the two organisations are very different and will make the
merger difficult. It begs the question of whether the Linde Engineering group should
be spun off as a separate company.
The devil is in the detail…
The overview of the proposed merger showed that on a headline basis the might be
some issues in a number of countries based on total market share.
However, the authorities generally look deeper at the impact on the various product
lines and, in the case of large companies, on a regional basis.
Whilst it is evidently true that some national governments pay lip service to the
concept of monopoly practices, the USA treats the issue very seriously and anti-trust
issues have, in the past scuppered acquisitions and merges.
Linde Praxair Combined Air Liquide Airgas Combined
Air
Products Others
USA
ONSITE 13% 24% 37% 22% 0% 22% 37% 4%
BULK 17% 25% 42% 20% 8% 28% 22% 8%
PACKAGED 9% 18% 27% 2% 22% 24% 9% 39%

5. 5
The proposed acquisition of BOC by Air Liquide and Air products at the turn of the
century was eventually abandoned because they could not dispose of significant
assets in the USA, except as an unacceptable price to a competitor. This merger will
face similar challenges.
On sites and Pipeline business
Because the contracts are often of 15 years duration and for significant revenues, a
win can add a few percent to any company.
The real issue is that it is difficult for a potential customer to get enough bids, even
from the existing 4 major bidders, even on a greenfield site.
Bids are also influenced by the ability of the supplier to add value from co-products
such as liquid and argon, which share the production cost.
If there is an incumbent supplier the problem is even greater. The merger threatens
the potential customer by reducing the number of potential bidders to three and other
market factors, such as bulk dominance might reduce the number of bidders to one
or two.
Bulk Gases – LOX, LIN, LAR and bulk Hydrogen
It is immediately obvious theta the 42% market share of the bulk business raises
cause for concern at a national level.
Decisions on forced disposal will depend on a regional analysis. However, much of
the packaged gas business is supplied by many small companies, which generally
operate on a state or county level. These companies by the bulk liquid used to
supply their filling systems mainly from the majors.
In some cases, they even buy wholesale cylinders from the majors for local
distribution.
It is clear that with a market of only three major players there will be a temptation to
increase the price of bulk liquid to “others” thus creating an anticompetitive rise in
packaged gas prices.

6. 6
This was one of the reasons that Airgas acquired or built is own liquid production
facilities.
Packaged Gases
The market shares in packaged gases are below a monopoly level on a national
basis and on a local basis there are many small companies.
The real threat is that by using local bulk leverage there could be acquisitions that
create regional monopoly positions.
The regulator needs to look at both the effect on local packaged gas markets of the
merger and the knock-on from the bulk business.