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Long Lost Brothers Reunified

16 August 2016 by pdonnat

Linde AG and Praxair Inc are working at a merger of equals. Carl von Linde created the eponymous company at the end of the 19th century. He was a German professor working on refrigeration and developed industrial processes for refrigeration, gas liquefaction and separation. Georges Claude, a French engineer, developed at the beginning of the 20th century a competing process source of Air Liquide SA worldwide development. Carl Von Linde created a second company in the US which turned independent during the first world war, Praxair was born. Linde merging with Praxair will reduce air gas suppliers to three majors controlling more than 75% of the industrial gas worldwide. After a few buoyant years for Linde, the company is struggling with industrial gas on the decline and with hardly compensating healthcare gas development. The merger is obvious for cost cutting and for increasing pricing power but the regulatory hurdle will be hard to pass. The equity market is applauding the merger. Linde stock price is closing up 10%. The CDS is unchanged trading already at very tight level around 35bps. This merger is not a done deal. The benefit for the consumers is not obvious. Only more R&D could make sense. Using good old thermodynamics, these companies are very active on R&D. Air Liquide is applying for more than 300 patents a year. Surprising for just compressing gas in a bottle….