Linde, Praxair expect bids for planned divestitures this month -sources

NIPPON SANSO HOLDINGS

08/03/2018 16:37

By Arno Schuetze and Foo Yun Chee
    FRANKFURT/BRUSSELS, March 8 (Reuters) - Gases groups Linde
 LING.DE  and Praxair  PX.N  are pressing ahead with
divestitures to facilitate their planned $85 billion merger and
have asked potential buyers to present first-round bids this
month, people close to the matter said.
    The exact size of asset sales has not yet been finalised in
negotiations with antitrust regulators, said Linde Chief
Executive Aldo Belloni after the company on Thursday posted a
2.8 percent rise in 2017 operating profit.  urn:newsml:reuters.com:*:nL5N1QQ1BB
    But broad lines have become clear: Linde and Praxair are
planning to divest assets with about $750-800 million in
combined earnings before interest, tax, depreciation and
amortization, the sources said, adding they expect them to sell
at an enterprise value of 10-12 times that. 
    Peers such as Air Liquide and Air Products trade at 11-12
times their expected core earnings, while Praxair trades at 13.7
times and Linde at 9.5 times. 
    Finding buyers for the assets would smoothe the regulatory
path to clearance for the merger. It would follow, in a
different blockbuster deal, Bayer agreeing to large divestitures
to peer BASF to get an antitrust nod.  urn:newsml:reuters.com:*:nL5N1QP3ET
    The Linde and Praxair assets up for sale are two-thirds
based in Europe with the remainder in the United States.
Industrial gases are driven to customers usually within a 100 to
250-mile radius of production facilities, and regulators
therefore examine regional rather than national markets in their
reviews.
    In a bid to appeal to regulators and to attract a broad
range of suitors, the European assets have been split into two
alternative bundles, only one of which would be sold, the
sources said.
    One package comprises Praxair assets in various parts of
Europe, while a second package combines Linde assets in Spain
and Portugal as well as some additional European Praxair assets,
they added.
    Several buyout groups have been working on their bids, based
on information packages that Linde and Praxair sent out last
month.
    CVC, which has tied up with gases group Messer, is expected
to bid for all assets on offer, as are Carlyle  CG.O , KKR
 KKR.N  and Onex  ONEX.TO , the sources said, adding that some
investors were still in talks to tie up with gases groups.
    Regulators have in the past blocked divestitures of assets
to private equity, citing a lack of industrial clout.
    Some large peers, however, face potential antitrust concerns
on their own and Linde peers such as Air Liquide  AIRP.PA , Air
Products  APD.N  and Taiyo Nippon Sanso  4091.T  are expected to
make offers only for individual parts of the portfolio. 
    Linde and Praxair have asked for first-round bids to be
handed in by the end of March. But people close to the matter
said the deadline may be delayed as some bidders have asked for
more detailed financial information before submitting bids.
    Linde said last month that divestments would be larger than
initially planned. However, the company stressed on Thursday
that a pain threshold would not be breached.     
    The two companies had said last year that either party could
walk away or seek to renegotiate the merger agreement if
divestitures reach more than 3.7 billion euros in total revenues
or 1.1 billion euros in combined core earnings (EBITDA).
    Praxair and the potential suitors declined to comment or
were not immediately available for comment.
 ($1 = 0.8037 euros)

 (Additional reporting by Alexander Hübner
Editing by Douglas Busvine and David Evans)
 ((arno.schuetze@thomsonreuters.com; +49.69.7565.1197; Reuters
Messaging: arno.schuetze.reuters.com@reuters.net))