Linde-BOC Merge as Industrial Gas Aims for $52 Billion Global Market in 2008

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Researched by Industrial Info Resources (Sugar Land, Texas). After the FTC (U.S. Federal Trade Commission) cleared the proposed acquisition of industrial gas company BOC Group (NYSE:BOX) (London, United Kingdom) by Linde AG (Frankfort:LD.E) (Wiesbaden, Germany), subject to the sell off of certain assets, it was significant that Wolfgang Reitzle, President and CEO of Linde, indicated the synergistic market blend, which is targeted by bringing the two companies together. “This is a milestone on our way towards the merger with BOC. We will swiftly take the next steps to implement the transaction and look forward to our joint integration process with BOC,” Reitzle commented. Since the deal was first mooted at the beginning of 2006, industry observers have confirmed that the two companies make a good fit together in the global industrial gas market.

To meet the FTC conditions Linde agreed to sell eight air separation units in the U.S. and to end three liquid helium purchase agreements with suppliers in the U.S., Russia, and Poland as well as associated assets. This divestiture represents about $225 million of sales volume for the year of 2005.

The combined entity could have total sales of about $14.3 billion and will rank as the world’s largest company in the sector with 22.8% of global markets outstripping the current leader, Air Liquide (NYSE:AIQUY) (Paris, France), with 19.6%. For related news item see June 9, 2006 – Takeover by Linde Looms as BOC Bags Indian Industrial Gas Contract.

The industrial gas market is expected to grow at an annual rate of up to 7.5% over the next five years. In 2003, the global market for the industry was estimated at $36 billion. In 2005, the figure was $49 billion, which was 10% up on the 2004 total. In 2008, global sales are predicted to reach $52 billion.

The strong growth base for the industry is spread across major industrial and commercial sectors, which include mining, oil and gas, agriculture, auto and other major manufacturing sector applications, food, healthcare, and chemical products. Industrial gases are a critical part of the process in an estimated $9 trillion of annual global GDP, which represents participation in 50% of the world’s economy production processes.

The increased use of gases such as nitrogen, oxygen, hydrogen, carbon dioxide, argon, helium and acetylene will continue to be spurred by the demand for environmentally-friendly products and applications in glass, steel and non-ferrous and new materials processing. The energy sector will be a major consumer of gases in value adding cracker processes and various renewable and sustainable energy technologies such as fuel cells and exhaust and discharge processing.

If the total market activity of the newly merged company is taken into account, including joint ventures and equity affiliates, the Tier 1(over $1 billion in annual gas revenues) industrial gas company league will have Praxair (NYSE:PX) (Danbury, Connecticut) in third spot with 13.9% of the global market followed by Air Products (NYSE:APD) 12.6% (Allentown, Pennsylvania), Nippon Sanso (TSE:4091) 4.6% (Japan), Airgas (NYSE:ARG) 3.0% (Radnor, Pennsylvania), and Messer 1.4% (Sulzbach, Germany), according to Spiritus research.

BOC is organized on three global lines of business: PGS (Process Gas Solutions); ISP (Industrial and Special Products) and BOC Edwards, which supplies gases, equipment and services to the semiconductor industry.

BOC Edwards is a world leader in vacuum technology and also supplies pumps and systems for chemical, pharmaceutical, metallurgical and scientific applications. The operation accounts for 18% of BOC Group revenue and in 2004 had turnover of $1.5 billion and an operating profit of $89 million.

In the last days of July, after the FTC had cleared the Linde-BOC merge, Unaxis Holding AG (NYSE:UNAX) (Pfaffikon, Switzerland) was reported to be in the initial phase of considering the acquisition of BOC Edwards. Official confirmation of this intention was not available from either company. As the possible deal would lie outside the currently agreed divestiture, this diversion of assets, and any other pieces of the current corporate portfolios which are cut loose, in terms of good fit and rationalization, could alter the final market share statistics by the end of the year. So too, could other mergers between Tier 1 industrial gas companies and amalgamations and acquisitions among the smaller operators currently representing 22% of the global market.

Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 23 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.