Linde, Praxair Said to Face EU Objections Within Coming Days

(Bloomberg) -- Linde AG and Praxair Inc. are poised to get a so-called statement of objections listing potential reasons for the European Union’s antitrust regulator to block their proposed $46 billion merger, according to three people familiar with the EU review.

Such a filing -- common in complex merger probes -- would lay out precise concerns with the transaction combining the German and U.S. industrial gas suppliers and should provide a road map for what the companies would need to sell to win approval.

The document is likely to be sent in the coming days, said the people on condition of anonymity because the process isn’t public. Companies can argue with the European Commission, the EU’s regulatory arm, in writing and at a closed-door hearing and seek to allay potential problems with concessions. According to the EU’s strict deadlines for deal reviews, any SO would need to be issued by the end of the month.

Linde and Praxair set hard limits on divestments when they first hashed out their merger plan, capping what they would sell and fixing an October deadline to get antitrust approvals. Combined, the assets can’t have more than 3.7 billion euros ($4.4 billion) in annual sales or earnings before interest, depreciation and amortization of 1.1 billion euros.

Asset Sales

Munich-based Linde is making progress on asset sales that it will need to sell to win regulatory approval, Chief Executive Officer Aldo Belloni said earlier this month. The deal’s biggest hurdle is the EU merger review, which currently has an Aug. 9 deadline that can be extended. Opposition from the Brussels-based watchdog has forced companies to abandon deals or sacrifice more assets than planned.

Linde representatives and the Brussels-based commission declined to comment. Danbury, Connecticut-based Praxair didn’t immediately respond to a request for comment.

Linde shares were down 0.5 percent to 198.30 euros at 3:18 p.m in Frankfurt trading, after falling as much as 1 percent.

While an SO is often a sign of difficult negotiations with regulators, some companies wait for regulators to issue the complaint before trying to address their concerns. The specifics in the documents can make it easier for companies to tailor concessions that will appease EU officials.

An SO sent out to Bayer gave the German chemical giant a better idea of the EU’s potential concerns over its $66 billion takeover of Monsanto Co., which was cleared with concessions earlier this year.

Three Providers

The commission warned in February that combining Praxair and Linde would cut down major providers in Europe for gases such as oxygen and helium to just three. The new company may have the power to increase prices and coordinate supplies with its only two main rivals, Air Liquide SA and Air Products & Chemicals Inc., it said. Regulators saw no signs that any new companies would emerge to compete with these four firms.

Linde and Praxair have a self-imposed Oct. 24 deadline for all approvals. The firms have started the sale of European and U.S. assets worth about $8 billion, people familiar with the matter have said.

Interest for the assets have come from competitors Air Liquide, Air Products, Germany’s Messer Group GmbH, as well as Taiyo Nippon Sanso Corp.’s gas unit, people familiar with the matter said in March. Also interested are private equity groups including KKR & CO. and Carlyle Group LP, the people said. Buyout Firm CVC Capital partners is working with Messer, they said.

©2018 Bloomberg L.P.