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January 30, 2017 2:30 AM, EST

Praxair-Linde Merger Shuffles Market for Industrial-Gas Distribution Fleets

John Sommers II for TT

This story appears in the Jan. 30 print edition of Transport Topics.

Operators of private fleets that distribute industrial gases are bracing for more change as consolidation continues to shake up the biggest players in the market.

In December, Praxair Inc., based in Danbury, Connecticut, made an offer to acquire German company Linde Group. The transaction, valued at $35.6 billion, follows the purchase in 2016 of U.S.-based Airgas Inc. by France’s L’Air Liquide SA for $13.4 billion.

Industrial gases are used in a number of sectors, including oil and gas, steel making, health care and food manufacturing. All four of the companies involved in these two mergers operate some of the largest fleets in North America.

The merger of American Air Liquide and Airgas, in fact, propelled the company to No. 19 on the Transport Topics list of the Top 100 private carriers for 2016 with a combined fleet of 1,754 tractors, 4,117 straight trucks and 3,126 trailers.

The fleet is even larger now, based on data filed with the U.S. Department of Transportation. In a filing in September, American Air Liquide and Airgas reported having a combined fleet of 2,103 tractors, 4,200 straight trucks and 3,707 trailers.

The push by industrial gas companies to consolidate is driven, in part, by the need to reduce expenses in the wake of slowing growth in China and weaker demand from steel and oil and natural-gas customers, according to industry analysts interviewed by Bloomberg News.

Executives at Praxair and Linde said combining operations could save as much as $1 billion annually, although it’s not clear if the cost-cutting moves will directly affect fleet operations.

To offset slowing growth, industrial gas suppliers are branching out into medical gases to secure new revenue streams, Bloomberg reported.

Linde owns Lincare Holdings Inc., for example, and earlier this month, the company announced the purchase of The Service Center, a Broadview, Illinois-based provider of medical oxygen and respiratory equipment repair services in the Midwest and Southeast.

Praxair ranks No. 31 on the private TT100 with 1,115 tractors, 1,787 straight trucks and 3,677 trailers, while Linde North America, based in Murray Hill, New Jersey, ranks No. 51 with 733 tractors, 2,270 straight trucks and 2,060 trailers. The combined Praxair-Linde fleet would have ranked No. 18 on the 2016 Top 100.

The combination of Praxair and Linde would create the world’s largest supplier of industrial gases with annual revenue of $30 billion.

“The strategic combination between Linde and Praxair would leverage the complementary strengths of each across a larger global footprint and create a more resilient portfolio with increased exposure to long-term macrogrowth trends,” Praxair CEO Steve Angel said in the Dec. 20 announcement.

“We want to combine our companies’ business and technology capabilities and form a global industrial gas leader,” Linde CEO Aldo Belloni said.

The proposal could draw scrutiny from the Federal Trade Commission, which ordered the divestiture of assets used to produce and supply several types of industrial gas in bulk, including oxygen, nitrogen, argon, nitrous oxide, liquid carbon dioxide, dry ice and packaged welding gases sold in retail stores as a condition of the Air Liquide-Airgas deal.

FTC also approved the sale of Air Liquide assets used to produce liquid carbon dioxide in Galva and Sergeant Bluff, Iowa, in December to Reliant Holdings, a company based in Odessa, Texas, that supplies carbon dioxide gas for fermentation and processing of corn into ethanol and for use in the food and beverage industry, the production of dry ice and stimulation of oil and gas wells.

Reliant Holdings President Scott Vanderburg declined to provide further comment on the transaction to Transport Topics.

Matheson Tri-Gas, based in Basking Ridge, New Jersey, purchased 18 air separation plants in 16 locations, two nitrous oxide plants, four carbon dioxide plants and related assets from Air Liquide in the United States, plus three Airgas retail outlets in Alaska. The purchase added nearly 100 tractors, 53 straight trucks and 131 trailers to Matheson’s fleet.

Matheson is owned by Taiyo Nippon Sanso Corp. of Japan.

After Praxair, Linde, Airgas and American Air Liquide, the next-largest industrial gas distributor is Air Products Inc.. The Trexlertown, Pennsylvania-based company ranks No. 74 on the private TT100 with a fleet of 550 tractors, 95 straight trucks and cargo vans and 2,000 trailers in 2016.

Air Products is disposing of its electronics and performance materials businesses, along with an energy- from-waste operation, and plans to focus more on the industrial gases market in the Americas, Asia and Europe, the Middle East and Africa.

These actions will “enhance our ability to take advantage of exciting opportunities to grow our core industrial-gases business,” Air Products CEO Seifi Ghasemi said in a recent letter to shareholders.