BOC seeks pounds 15bn deal with French gas giant
Monday 21 June 1999
It is understood that the breakdown of talks could rapidly be followed by the Surrey-based company receiving an approach from France's Air Liquide - a move that would create the world's largest industrial gases group, with a market value exceeding pounds 15bn.
Danny Rosenkranz, chief executive of BOC, is thought to favour a tie- up with the French group - the industrial gas sector's global leader. Matching BOC's substantial operations in North America and Asia with Air Liquide's pan-European operations would create an industry powerhouse and could drive further consolidation in the sector.
The executive culture and management structure of BOC and Air Liquide are seen as helping rather than hindering a merger.
Alain Joly, the head of Air Liquide, recently expressed a desire to make his company more Anglo-Saxon by looking to boost shareholder value after a period of market underperformance.
It is expected that the top posts in the combined group would be split, with Mr Joly becoming chairman prior to his retirement in 2001, leaving Mr Rosenkranz in the chief executive's slot.
People familiar with the situation said that Air Liquide and Air Products, another US gases group, were jolted into action when the BOC-Praxair talks became public last month. But hopes of an Anglo-American linkup involving Praxair floundered at the weekend over management control and other issues, they said.
It is also understood that a possible dual approach from Air Liquide and Air Products, designed to carve up BOC between them, has been rejected in advance by the British firm. Such a deal would have faced close regulatory scrutiny, particularly in the US. BOC would be left irredeemably damaged should a joint bid come unstuck, according to one source.
BOC's board is believed to favour a renewed approach from Air Liquide. "The ball is very firmly in Air Liquide's court," said one insider. "Air Products' presence is not welcome. But a new Air Liquide approach alone would be welcome."
A tie-up would create a diversified gas giant with annual sales of pounds 7.5bn. In 1998, BOC had sales of pounds 3.3bn and rang up pretax profit of pounds 247.2m.
Its shares closed up 18p at an all-time high of 1,231p on Friday, up nearly 50 per cent from a year ago. That values the company at pounds 6.0bn.
Industrial gases are used in a wide range of manufacturing and service applications and processes, ranging from electronics factories to chemical plants and hospitals. Analysts say the sector is ripe for consolidation.
About 55 per cent of Air Liquide's sales are in continental Europe and 30 per cent in North America. BOC's sales are divided roughly equally between North America, Asia-Pacific and the UK.
The British company has been streamlined over the past 18 months with the elimination of 5,000 jobs, a process that is forecast to yield annual cost savings of pounds 120m. BOC has also cut gearing substantially with the pounds 640m sale of its Ohmeda healthcare business.
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