City warms to BOC's $10bn US talks

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The Independent Online
SHARES IN BOC soared by more than 10 per cent yesterday as the market reacted positively to expectations of a $10.3bn (pounds 6.3bn) merger between the UK industrial gases group and Praxair of the US.

BOC, announcing strong interim results, refused to comment on the talks with Praxair, aimed at creating the world's biggest gases business.

Group chief executive Danny Rosenkranz said: "I'm steering completely clear of any answers on that. No comment, because I'd go down a very tricky path."

American analysts said the talks had been initiated by Praxair and were the consequence of major senior management problems and a general lack of direction in the US company.

Paul Leming, a chemicals analyst with HSBC in New York, said the current chief executive, Bill Lichtenberger, had not adequately prepared the company for his retirement. "It's been a one-man show for the last five or six years. There's a real sense of lack of direction."

Analysts believe the tie-up between the two similarly-sized companies is likely to be a genuine merger rather than a takeover. BOC is viewed as the stronger party and Mr Rosenkranz is tipped to be in overall control of the new group, which will be listed in London and New York. An announcement on progress of the talks is expected in the next few days.

Share prices throughout the sector rose on the merger speculation and on BOC's buoyant results, which saw the group report first-half pre-tax profits of pounds 184.4m, up from pounds 179.8m.

Mr Rosenkranz said he was encouraged by the group's performance and felt several negative factors - including the Asian economic crisis - which have dogged the group in recent years are being worked through.

"Last year we came through an incredibly tough year. Semi-conductors were through the floor, we had the Pacific markets and currencies plagued us.

"We've taken out a tonne of cost and the management has improved. The mood in BOC is much better," he said, stressing that the group was on course to meet its target of cutting annual costs by pounds 120m.

A UK analyst said the results reflected sentiment in the City that the group had addressed its problems. "The company's looking very good and the signs are that the Far East, 30 per cent of their market, is improving. The indications are that the trading pattern in March will continue into April. Praxair is the icing on the cake of the buy story," he said.

Shares in BOC closed at a 12-month high of 1,138p.