August 07, 2018 | Industrials | Europe | Ended

Linde / Praxair: US and China Antitrust Analysis; Breaching the Divestiture Cap

The Linde / Praxair risk arbitrage spread dramatically widened on 6-Aug-18 after the US Federal Trade Commission (FTC) indicated increased divestiture expectations from the companies, beyond the recently-announced €2.8bn sale of Linde’s Americas business to Messer Group and CVC Capital Partners. The companies confirmed that there is a higher probability that the agreed divestiture cap will be breached and with a non-waivable longstop date of 24-Oct-18, the companies will be pressed to immediately offer additional commitments or watch the merger lapse. In this research report, we summarise our conversations with Linde and re-visit our antitrust assessment of the merger in two particular regions, the US and China. Based on our findings, we place our antitrust work in the context of the divesture cap and precedent transactions that faced similar scrutiny. Finally, we provide our views on the companies’ ability to come up with a sound revised remedies package to appease regulators ahead of the longstop date.

Contents 1. Situation Overview and Our Conversations with Linde on US Antitrust 2. How Regulators Have Broken Down the Atmospheric Gases Market 3. US Antitrust Assessment 4. China Antitrust Assessment 5. Exceeding the Divestiture Cap, Views on Antitrust and Potential Buyers 6. Threat of the Longstop Date, the Risk Arbitrage Spread and Strategic Rationale (14 pages)

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