(adds commentary from investor group DSW from paragraph 16)
LONDON (ICIS)--Management at German industrial gases major Linde rejected late on Monday calls from an investor to allow a vote on the terms of a potential merger with US peer Praxair at the upcoming annual general meeting (AGM).
Since the two industrial gases majors announced their intention to merge in December 2016, despite an array of voices opposing the deal.
Among others, the trade unions represented at Linde have consistently said a potential merger with the US peer could put jobs in Germany at risk, something Linde’s management has denied.
Under German law, the unions could block a deal at Linde’s supervisory board. Nevertheless, a filing from Linde to the US’ Securities and Exchange Commission (SEC) late on Monday showed its determination to continue with merger talks.
“We appreciate our shareholders’ active involvement in the proposed business combination with Praxair, which is indeed important and currently still in the process of negotiation,” said Linde in a letter to investor group Deutsche Schutzvereinigung fur Wertpapierbesitz .
“I also gather from your request that you view the transaction positively as such and that your request is not intended to prevent such a proposed combination.”
However, Linde’s management is not willing to give a vote to the investor group at the upcoming AGM to be held on 10 May, despite repeated requests so shareholders could have a say about the way forward on the merger talks.
“We do differ in our opinions as to whether we, as the Executive Board, have the right to hold talks with Praxair about a combination and to conclude a so-called Business Combination Agreement if these talks come to a successful conclusion, even without the express approval of the General Meeting,” Linde said in the letter, later filed with the US Securities and Exchange Commission (SEC).
“I already explained to you in my letter of 7 March 2017 why we do not consider the approval of the General Meeting to be necessary... accordingly, we must decline your request to make additions to the agenda… Naturally, we can again exchange views and opinions also regarding this question on the occasion of our meeting on 11 April 2017.”
DSW could not be reached for comment at the time of writing.
In a statement published on its website on Tuesday, the group describes the intention to merge with Praxair as a “great decision” but warned a final agreement could not go through without the consent of the AGM.
“We believe that this merger would change the company so severely that such a decision cannot be taken without the consent of the shareholders," said Daniela Bergdolt, vice president of DSW.
DSW’s managing director, Marc Tungler, added, “Both institutional investors from Germany and abroad” as well as private investors had joined DSW’s petition to hold an AGM and warned Linde’s management they had achieved the “necessary quorum of shares” in order to hold that AGM.
According to DSW, the resulting entity coming out from a merger with Praxair would have a “completely different” governance structure than the current one, putting Linde’s shareholders at a disadvantage as they will not be offered “a real choice” to reject or approve the deal.
“This will, among other things, mean that shareholders will be confronted with a completely new legal system, with correspondingly more difficult opportunities to exercise their shareholder rights,” concluded DSW vice president Daniela Bergdolt.
In a written response to ICIS, investor group DSW insisted on Tuesday afternoon it will continue demanding the right to vote on the matter, arguing that process would be “too important” for Linde’s shareholders not to have a say.
“First, it´s clear that DSW has not started this process to stop it directly. In our opinion, it´s too important for the shareholders,” it said.
“After Linde has rejected the demand from DSW, we will check all possibilities to assert our issue in court.”
According to Linde’s documentation, DSW represents investment funds Aberdeen Asset Management, BayernInvest Kapitalverwaltungsgesellschaft and BayernInvest Luxembourg, as well as independent investor Elisabeth Riedel.Pictured above: Linde's hydrogen centre in Unterschleissheim, Germany. (Source: Linde)