German industrial gases group Linde has called off merger talks with US peer Praxair, which if successful promised to create a market leader with a value of more than US$60bn.
“While the strategic rationale of a merger has been principally confirmed, discussions about details, specifically about governance aspects, did not result in a mutual understanding,” Linde said in a statement. Praxair also confirmed in a one-sentence statement that discussions had been terminated.
While reports suggested that the talks were only at a “preliminary stage”, according to the Financial Times the two companies had been in negotiations for at least three months and that the structure and many key parts of a deal were already in place.
However, sources at the German group told the FT that an internal disagreement at Linde had led to negotiations being terminated and that Wolfgang Reitzle, chairman of Linde’s supervisory board and the architect of the deal, faced opposition from Georg Denoke, Linde’s chief financial officer (CFO) since 2006.
Thomas Wrigglesworth, analyst at Citi, suggested that meeting tough regulatory requirements was also a factor in the failure to reach a deal. “A failure of these businesses to integrate not only suggests that any bid premium will be removed from Linde’s share price but also implies, we judge, that any further consolidation in the industry is unachievable as the regulatory challenges are too great to surmount,” he wrote to clients.
The talks took place against a background of consolidation in the industrial gases industry, where slower economic growth has weakened demand in the manufacturing, metals and energy sectors.
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