BOC agrees for $11.2 bn takeover deal

The companies said they had identified substantial growth opportunities in industrial gases for groups providing high-quality supplies to customers around the globe. Shares in BOC fell 22 pence to 13.65 pounds a share on the London Stock Exchange amid concern about regulatory hurdles. Analysts said these weren’t deal breakers, but would taketime to overcome and the stock has doubled in value since last October.

“The biggest hurdle is going to be in the US,” said Philip Morrish, analyst at Paribas. “There may be some issues about competition in the UK.” Others said the time lag before the deal was approved was capping the share price, as was the absence of any likely rival bid. “We’re not looking at a bidding war here, we’re looking at a done deal with a six-month time horizon,” said Peter Cartwright of Williams de Broe.

Air Products chairman and chief executive Hap Wagner was confident that the obstacles could be overcome and said the two companies were prepared to shed some BOC assets to clear the regulatory hurdles. “There will be some divestitures to third parties, but we thing we are going to be in good shape,” Wagner told reporters. “We believe the most significant divestitures will probably be in the US.”

Air Liquide and Air Products said they planned to split BOC’s assets in half, further strengthening Air Liquide’sposition as leader of the global gases market with a 24 per cent market share. Air Products will rise to joint number two with Praxair Inc of the US. They will command 15 per cent each.

Under the deal, Air Liquide will take BOC’s UK and Irish gases operations while Air Products will get BOC’s Australia and New Zealand operations. Air Liquide is expected to get most of BOC’s Japanese and Thai businesses, while Air Products will receive operations in Singapore, Southern China and Malaysia. BOC began life as Brin’s Oxygen Company more than a century ago and has grown into a global gases, distribution and vaccum technology business with over 35,000 staff around the world.

BOC stumbled into the media spotlight in May when it emerged it was having merger talks with Praxair to create the biggest industrial gases company with a 30 per cent share of the market. Talk of that deal roused Air Liquide to act to defend its market leadership. In June BOC said it had rebuffed offers from both Air Liquide and AirProducts.

The offer represents a multiple of 27.6 times BOC’s earnings, before exceptional items, of 52.99 pence for the year ended September 1998.

Air Liquide operates in 60 countries through 125 subsidiaries and 28,000 employees. The enlarged Air Liquide will swallow BOC’s expertise in specialty gases, helium and the food industry. Air Liquide said it expects the deal would enhance revenue growth and would be accretion to cash flow and earnings.

Air Products said the deal broadens its geographic presence, widens the product line and will enhance earnings pre-goodwill and cash-flow from the first year. The US company also has a successful specialty chemicals business, supplying to a wide range of sectors including adhesives, sealants, furniture, paints and coatings.