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Linde says Praxair deal won't push up industrial, medical gas prices

In reply to CCI, say there are various global and domestic players giving competition

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Germany's Linde and US-based Praxair, the two major industrial and medical gasses entities, have said their proposed global merger wouldn't have any adverse impact on the Indian market in terms of market pricing of their products and competitive forces currently present in the industry.

There are global firms like Air Products, Air Liquide, Taiyo Nippon Sanso as well as several Chinese suppliers and domestic players giving competition, Linde has said in response to a requirement by Competition Commission of India (CCI).

"Many local players, some of which have structural links with global companies, as well as the Chinese suppliers, are progressively expanding their presence in India, and are competing for the same set of customers which are served by the parties. This has, in fact, led to various customers switching from one supplier (including the parties) to the other competitors," Linde India said about its industrial gasses business which involves, among other things, supplying oxygen to steel plants.As reported by DNA Money earlier, the competition watchdog CCI is taking time to clear the proposed merger between Munich, Germany headquartered Linde with Connecticut, US-based Praxair Inc which supply various gases to industrial plants as well as oxygen and nitrous oxide for medical patients in hospitals across the world.

CCI had earlier issued a show-cause notice to the parties and has recently asked them to place facts before the public regarding the merger impact on addressable segments.

Under Section 29(2) of the Competition Act, if CCI is of opinion that the combination is likely to have an appreciable adverse effect on competition, it shall direct the parties to the said combination to publish details of the combination.

"Post-combination, the market shares of the combined entity in the tonnage segment (including in-house production of gases) will be in the range of 0-10% for hydrogen, 20-30% for argon and nitrogen, and 25-35% for oxygen. The current market shares of the parties reflect their past and not current position in the market," Linde said.

Presence of sufficient substitutes and gradual fall in market presence are some of the arguments placed by Linde.

"The parties benefited from an early mover advantage, being the first of the global industrial gas companies to enter the Indian market which led them to win a number of contracts in the 1990s and 2000s; hence, the shares today are reflective of past competition, which continue on account of the long-term nature of such contracts. This early mover advantage has, however, been steadily declining (particularly in recent years)," the company said.

SOLID GROUNDS

  • The market shares of the combined entity in the tonnage segment will be 0-10% for hydrogen, 20-30% for argon and nitrogen and 25-35% for oxygen
     
  • The current market shares of the parties reflect their past and not current position in the market
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