Channel News Asia  Jun 2  Comment 
MUNICH: German industrial gases company Linde turned its attention on Friday to winning over investors to its planned US$75 billion merger with U.S. peer Praxair , a task that Chairman Wolfgang Reitzle said was not straightforward. A day after...
Reuters  Jun 1  Comment 
The boards of Linde and Praxair voted on Thursday to merge, creating a $73 billion global industrial gases leader in what is likely to be the last in a wave of combinations that has resulted in a highly consolidated market.
Channel News Asia  May 26  Comment 
German industrial gases group Linde's supervisory board is due to vote on a merger agreement with U.S. peer Praxair on June 1, two people close to the matter told Reuters on Friday.
Channel News Asia  May 24  Comment 
German industrial gases group Linde's supervisory board will vote next week on a merger agreement with U.S. peer Praxair , German weekly WirtschaftsWoche reported, citing sources close to the negotiations.
Financial Times  May 10  Comment 
Shareholders of German chemicals group criticise tie-up with Praxair of US
Channel News Asia  May 10  Comment 
German industrial gases group Linde expects to complete its planned US$70 billion merger of equals with U.S. peer Praxair in 2018 if negotiations are successfully completed, Chief Executive Aldo Belloni told shareholders on Wednesday.
Channel News Asia  May 6  Comment 
Shareholder adviser Ivox Glass Lewis has called on Linde investors to vote against signing off on the actions of its management and supervisory board due to problems in the handling of a planned merger with peer Praxair .


Praxair, Inc. (NYSE: PX) is the largest industrial gases company in North and South America by sales, and among the biggest worldwide. Its primary products are atmospheric gases (gases that can be extracted directly from the air, such as oxygen, nitrogen, and argon) and process gases (gases that must undergo special processes to be manufactured, such as hydrogen, helium, and carbon dioxide). The company's gases are used in many industrial processes, such as the production of steel, semiconductors, medical devices and oil.[1]

The industrial gas business is regional in nature because transporting industrial gases over long distances (more than 250 miles) is cost-prohibitive due to the high expense of liquefying gas for long periods of time. Because industrial gases are commodities that are fairly cheap to produce, customers are often unwilling to pay high shipping costs. A majority of Praxair's operating income comes from long term (usually 10-20 years) contracts, in which the company builds plants for the customer, at the customer's site. This is capital intensive but has the benefit of allowing PX to deliver gas more cheaply by cutting out transportation costs altogether. The long length of the contracts also ensure steady sales.

As the foremost industrial gas provider in the emerging markets of Mexico, Brazil, China, and India, by sales, Praxair is poised to benefit from rapidly expanding usage of gases in these countries. These countries have very low per capita but rapidly rising consumption of gases compared to the U.S. and thus represent large potential markets for Praxair.

Praxair is one of the few companies that benefits from rising oil prices. Hydrogen is one of the company's staple gases and plays an important part in the process of extracting crude oil. As world demand for energy grows, so too will demand for hydrogen gas as more non-conventional oil is used. Although energy costs are the company's largest expense, that nature of its long term contracts allows it to pass along some of its energy costs to its clients.

Company Overview

Praxair does business in over 40 countries, but focuses on eleven core geographies where the company has large amounts of capital on the ground, which lets the company deliver its products to the customer at the lowest cost. 59% of the company's sales come from overseas.[2]

Business Segments[3]

Industrial Gases Distribution

Almost all of Praxair’s sales are generated from the sale of industrial gases in four regional segments: North America, Europe, South America, and Asia.

Gas sales and distribution methods were broken down as follows:

  • On-site/Pipeline - 24% of sales came from gases sold to large customers with on-site plants. Building the pipelines and plants is expensive, but it creates long-term contracts and steady sales, protected by the ability to pass-through energy costs. More than 50% of Praxair’s operating profit comes from the on-site business.
  • Merchant Market - 30% of sales came from gases sold to the merchant market. In the merchant market, excess comanufactures (extra gases generated by a plant) are liquefied and transported by truck to the customer’s facility. These contracts are shorter in duration, but allow Praxair to leverage existing investments.
  • Packaged-Gas Market - 33% of sales came from gases sold in the packaged-gas market. Bulk gases are packaged into high-pressure cylinders for small-scale users.
  • The remaining 14% of gases were distributed in other manners.

Surface Technologies

6% of total sales were generated by the Surface technologies segment, which supplies high-performance coatings to protect metal from wear, corrosion, and high temperatures. Surface technologies sales came mostly from the United States and Europe, with smaller operations in Asia and Brazil.

Geographic Regions[4]

  • North America - 52% of net sales
  • Europe - 14% of net sales
  • South America - 18% of net sales
  • Asia - 10% of net sales

Business Growth

FY 2009 (ended December 31, 2009)[5]

  • Net sales fell 17% to $8.9 billion due to lower volumes from the worldwide recession, negative foreign currency and cost pass-through effects, partially offset by higher pricing.
  • Net income increased by 3% to $1.25 billion. Excluding the impact of special items, adjusted net income decreased by 7%.

Trends and Forces

Demand for Praxair's Products is Growing in Emerging Markets

Praxair is the leading industrial gas provider in several emerging markets, such as Mexico, China, India, and especially Brazil, where is has a 65% market share.[6] Because per capita gas consumption in these countries is as low as 1% of that of the United States, demand in these markets will continue to grow for some time. Praxair’s solid position in China is demonstrated by its contract that provided drinking water to the Beijing Olympic Games.[7] China’s huge coal-gasification projects also provides a substantial upside to Praxair's business in that country.

Helium Demand Grows Quickly Amidst Shortage; Hydrogen's Use in Heavy Crude Extraction Causes Demand to Grow Rapidly

A worldwide helium shortage began towards the end of 2007, due to increasing demand and diminishing world helium reserves.[8] Helium is important to many sectors, including the manufacturing and healthcare industries, both of which are major end markets for Praxair (see above). Praxair stands to gain from a similar opportunity with hydrogen. Hydrogen is a key component in the production of heavy and non-conventional crude oil, such as tar sands or shale oil. Because such production is growing rapidly , hydrogen consumption will increase correspondingly.

Environmental Regulation is a Double-Edged Sword

As discussed above, hydrogen is an area of increasing growth for Praxair. Hydrogen processing plants, however, have been identified as a source of carbon dioxide emissions under California law. On the other hand, environmental legislation and regulation of other industries provides Praxair with a business opportunity, as it continues to develop application technologies that reduce customers’ energy consumption and lower emissions.

Energy is Praxair's Single Largest Cost Item

Energy is the single largest cost item in the production and distribution of industrial gases, in the form of electricity needed to power separation plants and oil for delivery trucks. As such, increasing energy costs have the potential to damage Praxair’s margins if it cannot pass through increased energy costs to customers. The company notes, however, that the supply of energy has not been a significant issue in the geographic areas where the company conducts business.This is in part due to the fact that Praxair's long term contracts often include clauses that allow it to pass along some or all of its energy related costs. Note, however, that increasing energy demand is also causing use of heavy and non-conventional oil (oil extracted from tar sands, shale oil, or other non-traditional sources) to rise. See above section on hydrogen for how this affects Praxair.

Commercialization of Hydrogen-Powered Vehicles Would Greatly Increase Hydrogen Demand

Many major car companies, including Honda Motor Company (HMC) and Bayerische Motoren Werke AG (BMW), have released cars that use liquid hydrogen as a fuel source.[9][10] While these vehicles are not yet ready for mass consumption, hydrogen-powered vehicles do have the potential for commercialization in the future. However, in addition to further development of hydrogen-powered technology, new infrastructure, such as hydrogen refueling stations, would need to be built and hydrogen-powered vehicles would have to meet stringent safety requirements. Furthermore, a challenge to hydrogen-powered cars has appeared in the form of electric cars that can simply be plugged in to charge, such as the Tesla Roadster or GM's Chevy Volt. This being said, if hydrogen-powered cars do become commercialized in the future, it would greatly stimulate demand for liquid hydrogen and could thus positively impact Praxair's business.


Global Competitors

Since the late 1990s, the industrial gas industry has seen a wave of consolidation that led to the current oligopoly; Praxair, along with the above three major competitors, form the global industrial gases oligopoly.

Regional Competitors

  • Airgas (ARG) is a regional competitor with Praxair in this category; Praxair is the second largest provider in the U.S. merchant gases market (see description above) behind Airgas.


  1. PX 2009 10-K "General" pg. 3
  2. PX 2009 10-K "International" pg. 5
  3. PX 2009 10-K pg. 4
  4. PX 2009 10-K pg. 25
  5. PX 2009 10-K "Five-Year Financial Summary" pg. 15
  6. gasworld, "South America demand drives gas consumption"
  7. MarketWatch, "Praxair affiliate gets oxygen-supply pact for the Olympics"
  8. SeekingAlpha.com, "Helium: Investing in the Loner Element"
  9. The Chosun Ilbo, "Hydrogen Cars Make First Korean Appearance"
  10. BusinessWeek, "2009 Honda FCX Clarity"
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