Takeover by Linde Looms as BOC Bags Indian Industrial Gas Contract

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Researched by Industrial Info Resources (Sugar Land, Texas). In the first week of June, as the BOC Group (NYSE:BOX) (London, United Kingdom) was contracting with JSW Steel (India) to construct one of the largest build-and-operate on-site air separation plants in India, the company’s head office in London was contemplating a $15.2 billion takeover bid from Linde (OTC:LDE) (Wiesbaden, Germany), which could see a global leader in industrial gases formed by the third quarter of this year.

A long-term contract has been entered into between BOC India, Limited (BOCI) and JSW for the supply of gases to support an expansion plan, which will double production capacity at JSW’s Bellary, Karnataka works to 7 million tons per annum. BOCI will supply over 3,000 tons per day of gaseous oxygen, nitrogen and argon from a custom-built air separation plant (ASU). The state-of-the-art ASU will cover JSW ‘s industrial gas requirements and will also produce liquid product to meet the growing demand from customers in southern India. The ASU is scheduled to begin operation in 2008 and will be one of BOC’s largest facilities in Asia.

The JSW gases requirement for the expansion of nearly 4,500 tons per day will see the company become BOCI’s largest customer in India. The new contract follows an agreement between the company in 2005 for the supply of 1,400 tons per day of oxygen and nitrogen. The ASU to produce these gases is currently under construction. In addition to its major existing air separation plants in Jamshedpur, Tarapur and Taljola, BOCI has recently commissioned a new merchant ASU in Hyderabad.

JSW Steel is part of the O P Jindal Group (New Delhi, Bombay) and is one of India’s largest steel manufacturers. It is a fully-integrated company operating facilities from mining iron ore to the manufacture of color-coated steel.

BOCI has operated in India since 1935, and is part of the 150-year-old BOC Group, which had global revenues of $8.51 billion in 2005 providing supplies and services to a spectrum of industries ranging from steel making to petrochemicals to food processing and distribution. Linde’s required sale of businesses to clear the takeover path would amount to $203 million. The resulting combined group, with annual sales of $15.2 billion, will be the world’s largest industrial gases group.

In pursuing the BOC takeover, which has caused rumblings about selling the family silver in the U.K., Linde will have to sell its U.K. gas business as demanded by the E.U. regulatory body regarding anti-trust issues. The German company must also cease supplying British customers with ethylene oxide, and BOC must sell its Polish gas business. Linde management is confident that the deal will be concluded in the third quarter of this year.

At the end of May, Linde acquired the Turkish Karbogaz Company, which is the regional market leader in carbon dioxide supply and had sales of $35 million in 2005.

Currently, the 124-year-old Linde employs 42,000 people worldwide and in 2005 had revenues of $12.1 billion. Its gas and engineering segments complement each other in customer supply and services in industrial and medical gases. The company equips nearly all the existing hydrogen filling stations and operates Germany’s sole hydrogen liquefaction plant.

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