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. Last Updated: 07/27/2016

Linde Takes Lead in Industrial Gases

FRANKFURT -- Linde, Germany's biggest maker of industrial gases, agreed to buy BOC Group of Britain for £8 billion ($14 billion) to become the world leader in the market of gases used in factories, refineries and hospitals.

Linde, based in Wiesbaden, Germany, will pay 1,600 pence ($28) per share in cash to create a group with almost $20 billion in annual sales, the companies said in a statement Monday. The sweetened offer is 39 percent more than BOC's close on Jan. 23, the day before Linde first made an unsolicited approach.

"The price looks high but it can be justified," said Matthias Engelmayer at Independent Research in Frankfurt. "It's a deal with lots of synergies, it won't ruin shareholder value and the companies fit together. Linde is strong in Europe and Germany, BOC in Britain and Asia." The analyst rates Linde "accumulate."

A combination of Linde, the fifth-largest gases producer, and Windlesham, British-based BOC, the No. 2, will overtake Air Liquide of France and create a company with 22 percent of the $53 billion global market. Linde shares jumped as much as 8 percent amid speculation that it will sell a forklift-truck unit valued at close to 3 billion euros ($3.6 billion.)

"We are happy with the increased offer and would sell at 1,600 pence," said Olivier Hertoghe, a fund manager at Petercam in Brussels who helps manage 100 million euros in the PAM Equities Europe Dividend fund, including shares of BOC, which on Jan. 24 spurned a 1,500 pence approach from Linde.

Linde said it secured 15 billion euros of credit to pay for the deal, refinance existing debt and provide working capital, backed by Commerzbank, Deutsche Bank, Dresdner Bank, Morgan Stanley and Royal Bank of Scotland Group. It will raise as much as 1.8 billion euros from selling new shares, issuing bonds and taking out loans.

The German company may also dispose of "selected activities," it said, without being specific. Linde would get about 2.9 billion euros from a sale of the forklifts unit, HVB Group analyst Christian Weiz said in a Jan. 25 investor note.

"Linde and BOC are a perfect match," said Linde chief executive officer Wolfgang Reitzle. "We will be able to offer our customers a significantly enlarged product range as well as comprehensive services, and we will be able to do so worldwide."

Reitzle, 57, will lead the enlarged company, according to his BOC counterpart Tony Isaac, 65.

Shares of Linde rose as much as 5.28 euros to 70.79 euros ($84.95), the second-sharpest advance on the Stoxx 600 Index of leading European companies, and were trading at 69.72 euros midday in Frankfurt, giving a market value of 8.35 billion euros, or $4 billion less than the price it will pay for BOC.

The British company's shares slipped 5 pence to 1,539 pence for a value of £7.76 billion, short of the offer price. It has gained 28 percent so far this year.

As of 2004, Paris-based Air Liquide had 18 percent of the industrial gases market. BOC had 13 percent, Connecticut-based Praxair had 11 percent, Pennsylvania-based Air Products & Chemicals had 10 percent and Linde had 9 percent, according to the German company.

"It's a good deal for both sets of shareholders," said Juergen Reck, an analyst at Sal. Oppenheim in Cologne, Germany. "Linde investors are getting a noncyclical business with steady returns, while BOC would have taken a long time to reach £16 a share on its own."