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More Divestitures Coming to Gases Sector

Although the $70 billion merger of German-based Linde AG and Danbury, CT-based Praxair Inc. could threaten smaller distributors through the sheer scale of the combined gases giants, the deal will also bring short-term opportunities as the companies divest assets to gain regulatory approval.

Praxair and Linde are in the second phase of the merger – approval from regulators and shareholders. The discussion around divestitures has already piqued the interest of distributors looking to take advantage of potential sales, according to Praxair CFO Matthew White.

"We have a significant amount of unsolicited interest in potential asset divestitures," White said on last week's second-quarter earnings call with analysts. "A formal process is being developed, which will be communicated to prospective buyers in the coming months."

When asked if regulatory provisions to divest certain assets, coupled with Praxair and Linde's desire to get the deal done quickly, could result in some "bargain" deals for buyers, White said that will depend on supply and demand.

"There's a significant amount of demand," White said. "As you know, money is still not that expensive today and some of the benchmark transactions that have occurred in this industry, I think the multiples have been fairly healthy. So it remains to be seen, but I would say from what we've seen at this point, it's lining up to be a good opportunity if divestitures are required in certain regions."

These new divestitures in the gases sector come on the heels of the $10.3 billion Air Liquide-Airgas deal, completed in May 2016. The transaction presented opportunities for smaller distributors and even large manufacturers to acquire assets of the merging companies.

In the most recent divestiture, Cleveland, OH-based Lincoln Electric Holdings Inc. agreed to buy Air Liquide Welding, a subsidiary of Air Liquide, for €115 million (US$125 million). The deal closed July 31.

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