BOC, the industrial gases group, revealed yesterday that it had rejected an audacious £7.6bn takeover offer from its smaller German rival Linde that sought to create a new world leader.
The move is the latest attempt by a foreign predator to buy a blue-chip British company, amid signs that some investors have become frustrated that top quality assets are being snapped up for cash by overseas groups who will then enjoy any upside available. Recent agreed deals include the foreign takeovers of the plasterboard group BPB, the ports business P&O and the mobile phone operator O2.
The offer from Linde is understood to be worth about 1,500p a share in cash - a chunky 30 per cent premium to BOC shares before the approach became public. The deal would be financed by debt, possibly accompanied by a rights issue. Linde claims to have a number of supportive banks lined up.
No details were provided by BOC of the approach, which it described as a "proposal". Up to now, analysts had been speculating that BOC and Linde would get together on the basis of a nil-premium merger and many doubted that the German group could mount a cash bid of this scale. The British company said: "The board of BOC has met, together with its advisers, and unanimously rejected the proposal because of its preconditions and its failure to value fully the growth prospects of BOC."
Those preconditions include financing, regulatory approval and due diligence, set out in a letter to the BOC board last week. The approach may lead to other offers emerging, probably from the private-equity world. Analysts believe other gases companies would be ruled out on anti-trust grounds. The German chemicals giant BASF has been linked with a bid for BOC in the past but it has ruled itself out.
According to a Citigroup research report, Air Liquide controlled 25 per cent of the global gas market in 2004, when BOC had 16 per cent and Praxair of the US 15 per cent. Air Products, also of the US, had 12 per cent and Linde had 11 per cent. BOC is the leading gases player in the fast-growing Asia region.
Peter Cartwright, an analyst at Williams de Broë, said that if Linde had offered some 1,500p a share, it would be an "attractive" offer but not necessarily a knockout blow. "Don't forget that BOC is a successful business. It is one of Britain's best companies - well managed with an attractive spread of assets," Mr Cartwright said.It is expected that regulators would not block the deal, as there is little geographic overlap in the operations of the two companies. However, BOC's management remains wary of antitrust problems and believes it has a strategy for growth as an independent company.
In 1999, BOC put itself up for sale and accepted an $11bn (£6bn) joint takeover offer from Air Liquide and Air Products, after receiving legal advice that the deal would be allowed. But regulators quashed it.
Linde's stock market value is €7.5bn (£5.2bn) and it has some €500m cash on its balance sheet. BOC shares jumped 21 per cent yesterday to 1,394p, valuing it at £7bn.
The German company is led by Wolfgang Reitzle, an engineer who formerly led the luxury car business at Ford, managing its premium brands including Jaguar. Before that he was at BMW, where he became head of product development at the age of 35, but he left in 1999 after being passed over for the top job.
Linde also has a large engineering business that makes equipment such as forklift trucks. Mr Reitzle has been chairman since 2003. Linde could help finance any takeover of BOC by selling its own engineering arm, and, once it gets its British target, it could dispose of BOC's non-gas operations - the logistics arm and the semiconductor business.Reuse content