EU opens in-depth probe into Linde-Praxair merger

LONDON (ICIS)–The European Commission has opened an in-depth investigation into the proposed merger between international industrial gases majors Praxair and Linde, it said on Friday.

The commission is concerned that the merger between US-based Praxair and Germany’s Linde may reduce competition in the supply of several crucial gases, like oxygen and helium, it said.

“Gases – like oxygen and helium – are crucial inputs for a large variety of products we use every day,” said Margrethe Vestager, the commissioner responsible for EU competition policy.

“Manufacturers need to buy these gases from a small number of suppliers. We will carefully assess whether the proposed merger between Praxair and Linde would lead to higher prices or less choice for European consumers and businesses,” she said.

Praxair and Linde are two of the four largest companies active worldwide across the whole supply chains of industrial, medical and speciality gases, the commission said.

They both supply carbon dioxide (CO2), which is widely used in the carbonated drinks industry and oxygen, which has a wide variety of uses from steel production to medical oxygen in hospitals and patient homes.

They also supply helium, a gas that is necessary for the proper functioning of magnetic resonance imaging (MRI) scanners.

The transaction would reduce the number of major players active worldwide and in Europe for the supply of these and many other gases to just three, the commission said.

“Other players in the market only have regional, national or local presence and lack the technical and financial capabilities to compete on an equal footing,” it said.

In addition, there was no indication that competition could be fostered by new entrants, due to the very high investment necessary to establish a meaningful position in the market, it said.

The commission is particularly concerned that there is a risk of price increases due to the increased market power of the merged entity, or the increased likelihood of coordination between the remaining players in the markets, it said.

The commission’s initial market investigation raised competition concerns for the supply of industrial gases, medical gases and related services, speciality gases, as well as the supply of helium, it said.

The market investigation confirmed that only the four main players have the engineering capabilities necessary to bid for the largest tonnage projects, that is, the construction of dedicated gas production units on customer manufacturing sites.

It also confirmed that only they have the necessary access to sources of helium worldwide to be competitive.

“Customers fear that the reduction of the major players from four to three would significantly deteriorate their ability to obtain critical inputs and products at competitive prices,” the commission added.

The commission will now carry out an in-depth investigation into the effects of this transaction to further explore its initial concerns.

The transaction was notified to the commission on 12 January 2018. The parties have decided not to submit commitments to address the commission’s preliminary concerns.

The commission now has 90 working days, until 4 July, to take a decision.

The opening of an in-depth investigation does not prejudge the outcome of the investigation, it added.

In anticipation of the Commission’s decision, Linde already said on 6 March that the two companies expected the EU’s decision to start an in-depth, phase II investigation.

“A phase II investigation is not uncommon for complex transactions, such as the one at hand,” said Linde at the time.

“The merger partners remain convinced of the merits of the proposed business combination. Linde and Praxair will continue the constructive dialogue with antitrust authorities in order to complete the transaction in the second half of 2018.”

Picture source: Stefan Kiefer/imageBROKER/REX/Shutterstock

Additional reporting by Jonathan Lopez