Approval of Praxair-Linde AG merger
On October 22, the FTC (Federal Trade Commission) provided conditional approval of the merger of Praxair (PX) and Linde AG. It said the two companies can’t combine their commercial operations until certain US-based assets are divested.
The assets to be divested include Linde’s US bulk business along with the sale of certain carbon monoxide, hydrogen, and steam methane businesses. Linde is expected to complete the divestiture by January 29, 2019.
Praxair and Linde expect the deal to be completed by October 31. Praxair stock is expected to be delisted on October 30. The new Linde PLC (public limited company) shares are expected to trade on the New York Stock Exchange and the Frankfurt Stock Exchange under the ticker LIN. Praxair also intends to delist its three euro-denominated notes.
The merger is expected to generate synergies and cost efficiencies of $1.1 billion–$1.2 billion over a period of three years.
Stock price reaction
Praxair stock rose 4.4% and closed at $166.88 on October 22. Year-to-date, the stock has risen 7.9%, outperforming its peer Air Products and Chemicals (APD), which has fallen 6.6%. PX has also outperformed the S&P 500, which has risen 3.1% in the same period. Praxair stock traded 4% above its 100-day moving average of $160.42. Its 14-day relative strength index of 52 suggests the stock is neither overbought nor oversold.
Investors can indirectly hold Praxair by investing in the Materials Select Sector SPDR ETF (XLB), which has invested 9.1% of its portfolio in Praxair. The fund also provides exposure to Sherwin-Williams (SHW) and PPG Industries (PPG) with weights of 6.2% and 4.5%, respectively, as of October 22.