BOC to accept pounds 7bn offer
Sunday 11 July 1999
"I do think there will be some kind of deal," said Fred Siemer, an analyst at FH Siemer. "But it's enormously complex - in the US alone hundreds of factories are involved."
The deal - which would value BOC, the world's number two gases company, at about pounds 14.50 a share - is likely to mean job losses and factory closures at the company.
"This is why [BOC chief executive] Danny Rosenkrantz has tried to stop the deal," said a source close to the talks.
Air Liquide, the number one gases company, and Air Products, number four, want to rationalise the relatively static industrial gases sector by carving up BOC's units in the US and Asia.
But the process of divvying up BOC's assets is complicated by the fact the industry operates as a patchwork of national semi-monopolies, and further consolidation could be stopped by competition authorities.
"If Air Liquide and BOC combine their CO2 businesses in the US, they will have over 50 per cent of the market. So Air Products will have to take that part of BOC's business. Or perhaps there can be a production joint venture which would sell to separate marketing arms," said Mr Siemer.
In an irony not lost on the City, BOC was put into play by its own chief. Mr Rosenkrantz agreed to merger talks with Praxair, the number three industrial gases company, this spring.
These hit a snag when Mr Rosenkrantz upset the merger-of-equals approach to the talks by pushing for BOC dominance at senior management level, according to analysts. Praxair, based in Danbury, Connecticut, called off the talks leaving BOC vulnerable.
"Air Liquide and Air Products decided to go for BOC together rather than to get into a bidding war," said a source close to both companies. This made sense since they would have had to divide up BOC's assets between them anyway to satisfy competition authorities. Mr Rosen-krantz tried to put the genie back in the bottle and failed."
Last week, BOC shareholders put pressure on the company's management to keep talks with Air Liquide and Air Products going. "It would take several years for the share price of BOC as an independent company to reach the value of the bid," said Peter Cartwright, an analyst at Williams de Broe.
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