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What Happened in the Chemical Sector Last Week?

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Part 3
What Happened in the Chemical Sector Last Week? PART 3 OF 3

Praxair and Linde AG Come Up with Merger Details

Praxair and Linde AG merger

On December 20, 2016, Praxair (PX) and Linde AG came up with specifics of the proposed merger plan. A new company will be formed once the merger is completed. Based on 2015 results, the combined revenue would be ~$30 billion with a market value of ~$65 billion. The combined company will have the potential to reach more end markets and have a strong global footprint.

Praxair and Linde AG Come Up with Merger Details

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Insight into the merger

  • The proposed merger is expected to be an all-stock transaction. Linde shareholders will get 1.5 shares in new holdings in exchange for one Linde share, while Praxair shareholders will receive one share in the new holding company for each Praxair share.
  • The combined company will be called Linde and is expected to be listed on both the New York stock exchange and the Frankfurt stock exchange.
  • The proposed merger is expected to bring $ 1 billion in annual synergies.

Stock price movement

Praxair shares dropped 4.0% for the week ended December 23, 2016, and closed at $117.59, as many analysts believed that the proposed merger is more favorable to Linde shareholders. Praxair traded 1.3% lower than the 100-day moving average price of $119.16, indicating a downward trend in the stock. Analysts expect PX’s 12-month target price to be at $125, implying a potential return of ~6.3% over the December 23 closing price. On a year-to-date basis, PX has moved up 14.8%.

Investors can indirectly hold Praxair by investing in the SPDR S&P Dividend ETF (SDY), which invests 1.0% of its total holdings in Praxair as of December 23, 2016. The top holdings of the company include Chevron (CVX), People’s United Financial (PBCT), and HCP (HCP), which have weights of 1.9%, 2.0%, and 2.0%, respectively, for the same period.

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