So far, the rivals were competing to get business from firms like Tata Steel and SAIL; post merger, the new entity would have greater bargaining power
As Germany's Linde and US-based Praxair, two of the largest global players in industrial gases space, firm up their $35 billion merger proposal, there could be implications on the Indian market, the biggest chunk of which is with these companies. Linde even has a listed entity in the country.
Industrial gas producers play a key role in diverse and important sectors from steel to healthcare, with portable oxygen cylinders being one of the retail consumer-facing products.
Globally, as well as in India, the merger of Praxair and Linde would significantly influence their combined customer base and the merged entity might have to sell some assets.
"The executive Board of Linde AG signed a legally binding business combination agreement with Praxair Inc governing the terms and conditions of a merger of equals between the two companies. The agreement provides for a combination of the businesses under a publicly traded new holding company, which will bear the Linde name," Linde India has said in a statement.
Global industrial and medical gases market is controlled by the trio of Linde, Praxair and France's Air Liquide and the deal would effectively create a competition between two unequals and lead to anti-trust issues in several markets including Asia where Linde has a strong presence.
"The deal would present some significant anti-trust issues in some regions and countries around the world. Linde would have gas sales of around $16 billion worldwide compared to Praxair's $10 billion. Combined, this would give them 33% market share," James Barr, business analyst with Gasworld said in a report, adding that there would be divestments in North America, parts of South America, in Europe and also in Asia to fulfill anti-trust concerns.
In India, Linde and Praxair have been competing with each other to get businesses from customers like Tata Steel and SAIL, among others. Post merger, the combined entity would have greater bargaining power and would help Linde maintain topline as well as profitability at a time of slowdown in the core sector.
The combined entity would also be able to take on rival Air Liquide, which had earlier grown bigger by taking over Airgas Inc last year.
Apart from these three major global entities, there are several smaller domestic players in the Indian market like Inox Air Products, Bhuruka Gases, Bombay Oxygen Corp, Southern Gas, Sicgil India and Ellenbarrie Industrial Gases.
In the quarter ended March 2017, Linde's profits fell sharply to Rs 1.36 crore from Rs 8.50 crore in the year-ago period even as its turnover rose to Rs 55.80 crore from Rs 45.30 crore.
"With capital investment cycle taking a pause, we are eyeing opportunities in areas like food preservation and bringing in newer technologies for medical gases. But I expect investments to pick up again," managing director Moloy Banerjee had earlier told DNA Money.
According to a recent report by Research and Markets, industrial gases market in India is expected to witness double-digit growth on the back of growing demand from metal industries. "Regular capacity expansion by automobile, refinery and chemical industries is augmenting demand for industrial gases in the country. Moreover, rising health awareness and booming food and beverages sector is also anticipated to augur well for the market in India," the report said.
...& ANALYSIS
- Linde and Praxair have been competing with each other to get business from firms like Tata Steel and SAIL
- The merger would effectively lead to anti-trust issues in several markets including Asia
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