Firms to create an industrial gas giant
As part of merger, Praxair to move its tax home to Europe
Praxair and Linde had market value of approximately $65 billion before the deal was announced.
U.S. industrial gas giant Praxair will switch its tax headquarters to Europe in a tie-up with German gas giant Linde, marking the latest example of a major American corporation flipping its tax home overseas through the mechanism of a merger.
Praxair and Linde said Tuesday that they had agreed to a “merger of equals” that would create a combined global entity with 2015 revenues of about $30 billion. Each company will control half of the board seats on the new entity, which will be called Linde, and their respective shareholders will each hold 50% of the stock.
The companies did not cite tax savings as a primary driver of the accord, but said the combined entity would be “domiciled in a neutral member state of European Economic Area,” which includes the European Union countries and a few others that have agreed to free trade with each other.
Linde has more than double as many employees as Praxair — 65,000 to Praxair’s 26,700 as of the end of 2015 — and roughly 70% more revenue.
The new company would retain the name Linde and would be listed on both the New York Stock Exchange and the Frankfurt Stock Exchange.
The deal comes at the tail end of a year of heightened scrutiny over U.S. companies executing foreign mergers to avoid U.S. taxes.
The Obama administration has sought to crack down on such deals, and President-elect Trump has also criticized them, citing a need to overhaul the American tax system to keep companies in the U.S.
Asked to comment on the tax implications, Praxair did not immediately have a statement. But Linde cited competitive advantages as the overriding reason for the merger.
“The driving force behind the transaction is the highly compelling strategic and industrial logic, which will enable both companies to enter the next phase of profitability and growth in a highly competitive global market,” it said in a statement. “In any case, the joint company will pay taxes where the value is generated.”
Praxair shares traded in New York fell 3.7% to $118.50 in early trading. Linde shares traded in Frankfurt declined 1.7% to 160.85 euros.
Praxair CEO and Chairman Steve Angel would lead the new company as CEO and join the board. Linde Chairman Wolfgang Reitzle would become chairman of the new company.
Together, Praxair and Linde had market value of about $65 billion before the deal was announced.
They estimated they would reap $1 billion in annual “synergies,” which often comes from cost cuts, combined purchasing power and new revenue opportunities.
The companies had held discussions earlier this year but they briefly collapsed because “Linde labor representatives weren’t comfortable with plans to move the combined company’s Euro- pean headquarters to the U.S.,” the Wall Street Journal reported.
But corporate operations will be “appropriately split” between Praxair’s hometown of Danbury, Conn., and Linde’s base in Munich, with the CEO based in Connecticut, the companies said.
“The strategic combination between Linde and Praxair would leverage the complementary strengths of each across a larger global footprint and create a more resilient portfolio with increased exposure to long-term macro growth trends,” Angel said in a statement.