COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 40/LM/May06
In the matter between:
LINDE AKTIENGESELLSCHAFT Acquiring Firm
and
THE BOC GROUP PLC Target Firm
_______________________________________________________________
Panel : N Manoim (Presiding Member), L Reyburn (Tribunal
Member), and M Mokuena (Tribunal Member)
Heard on : 02 August 2006
Order issued on : 02 August 2006
Reasons issued on : 20 December 2006
REASONS FOR THE ORDER
Approval
[1] The Competition Tribunal issued a Merger Clearance Certificate on 02
August 2006 approving without conditions the proposed merger between Linde
Aktiengesellschaft (“Linde AG”) and the BOC Group plc (“BOC”). 1
1 The proposed transaction was a global transaction which had been notified not only in South
Africa, but also to a number of competition jurisdictions abroad. Other jurisdictions included the
European Union (EU), the US, South Korea, Japan, Taiwan, Mexico, Brazil, China and
The parties and the merger transaction
[2] Linde AG is a publicly listed company incorporated under German law
whose shares are traded on the German stock Exchanges (i.e., Berlin,
Dusseldorf, Frankfurt (Main), Hamburg, Munich and Stuttgart) as well as on the
SWX in Zurich. No single shareholder controls Linde AG. 2 Linde AG is a global
entity which operates through established subsidiaries in each country in which
it undertakes its commercial activities. 3 Linde AG solely controls two
subsidiaries in South Africa, which are: Linde Material Handling (Pty) Ltd
(“LMH”) and Linde Process Plants (Pty) Ltd (“LPP”). 4
[3] BOC is a company incorporated under English law (that is, under the
company laws of England and the Wales). BOC is listed on the London Stock
Exchange and has no controlling shareholders. BOC controls a number of firms
worldwide. According to the merging parties, none of BOC’s global subsidiaries
have any relevance to the proposed transaction. However, BOC controls the
following two firms in South Africa – both of which are relevant for purposes of
our analysis – African Oxygen Ltd (“Afrox”) and BOC Edwards South Africa
Columbia. At the time of the merger filing with the Commission, the merging parties advised that
they were considering submitting – on a voluntary basis – filings in jurisdictions other than those
mentioned above. At the time of the merger hearing by this Tribunal, the EU had already cleared
the proposed transaction conditionally. See page 54 of the merger record.
2 Linde’s largest shareholders holding 10% and more of its equity are Allianz AG (12.3%),
Deutsche Bank AG (10%) and Commerzbank AG (10%). According to Linde AG, there are no
other shareholders holding in excess of 5% of the equity in Linde AG.
3 For a complete list of worldwide firms controlled by Linde AG, see pages 96104 of the merger
record (That is Annexure “A” to the merger record).
4 These subsidiaries are based in Johannesburg. The first subsidiary is located in Linbro Park
and the second, in Bryanston.
2
(Pty) Ltd.
[4] In terms of the proposed transaction, Linde AG will acquire the entire
issued share capital of BOC. 5 Once approved, the proposed transaction would
confer upon BOC the capacity to exercise sole control over the operations of
BOC. BOC will accordingly become a wholly owned subsidiary of Linde AG and
will form part of Linde AG’s ‘Gas and Engineering” division. The merging parties
intend to implement the proposed deal / offer by way of a court (High Court of
England and Wales) approved scheme of arrangement under section 425 of the
United Kingdom Companies Act, 1985.
Rationale for the transaction
[5] The merging parties submitted that the proposed transaction provided
them with the opportunity to create a leading worldwide focused industrial gases
business. Linde AG believes that the proposed acquisition will further enhance
its proven capability to execute a profitable growth strategy. Linde AG further
submitted that Linde AG will – through this transaction – combine the best
competencies and abilities of both organisations in a single integrated whole
and will be able to offer their customers a significantly enlarged product range
as well as comprehensive services. According to Linde AG, all these will be
achievable worldwide. 6 Commenting on the offer, Tony Isaac (CEO of BOC)
5 For greater detail in respect of the mechanisms of the proposed transaction, please see the
document entitled “Recommended Cash Offer for the BOC Group plc by Linde AG (dated 6
March 2006) – pages 169214 of the merger record.
6 See Prof DrIng Wolfgang Reitzle’s (CEO of Linde AG) comments on the offer – page 170 of
the merger record. See also page 68 of the merger record.
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said that “the offer represents an excellent opportunity for BOC shareholders to
realise significant value in cash from their investment…and that the combination
of BOC and Linde will create an even more powerful international gases group,
with significant operations on all five continents, that will benefit both its
customers and staff in the years to come”. 7
The relevant market
[6] As already alluded to above, both the merging firms are global entities
which operate through their respective subsidiaries worldwide, including South
Africa. We will for purposes of this transaction outline these parties’ activities in
the global market as well as in South Africa.
[7] Internationally, both Linde AG and BOC offer a broad range of gases
worldwide to customers in a wide variety of different industries. The gases cover
standard industrial gases , such as hydrogen, oxygen, nitrogen and argon;
medical gases , such as oxygen for medical use and nitrous oxides; specialty
gases, such as various refrigerants and calibration mixtures, and helium. Linde
is moreover active in the industrial gases plant construction business and the
manufacturing of forklift trucks and warehouse equipment (the socalled
“material handling”). 8 BOC has, furthermore, some activities in the logistics
sector. BOC’s activities are related to and/or conducted through: Process Gas
Solutions; 9 Industrial and Special Products; 10 BOC Edwards; 11 and Gist. 12
7 See footnote 6 supra.
8 The Linde Group manufactures and sells the socalled ‘material handling’ products through its
three (3) brands, that is, Linde; STILL and OM Pimespo. Linde AG has two main business
segments, namely: “Gas and Engineering” and “Material Handling”.
9 This encompasses large onsite supply schemes especially in the metals, chemicals and
petroleum sectors. Also included are small onsite and liquid supplies for customers in sectors
such as food, glass, minerals and for environmental applications.
10 This covers a range of products including compressed gases, special and medical gases and
Liquified Petroleum Gas (“LPG”) as well as smaller sales of bulk liquefied gases. Sales are
mainly to customers in the fabrication, medical and scientific sectors as well as to distributors.
11 According to the merging parties, BOC Edwards is synonymous with the semiconductor
industry, supplying it with a broad range of materials, processenabling equipment and services.
The vacuum technology business supplies vacuum pumps and pressure blowers for a variety of
industrial and scientific applications. Specialist businesses include pharmaceutical systems and
thin film coating disposition systems.
12 Gist, formerly BOC Distribution Services, specialises in the transformation of supply chains
for customers around the world. Gist offers a range of supply chain solutions from design, set
up, implementation and operational management through to supply chain consulting services.
Gist provides solutions for customers in the UK, continental Europe, Asia Pacific and North
America.
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[8]According to the merging parties, the parties’ activities on a worldwide basis
are complementary in terms of geography. They further submitted that while
both parties are major players in the global gases business, BOC has a strong
focus on growth markets such as Asia, where Linde has little or no presence. 13
[9]It therefore follows from the above that the merging parties’ activities overlap
quite significantly internationally. As can be seen from below, such overlap
seems minimal with regards to the South African market – the overlap being in
relation to the production and supply of ‘specialty gases’.
[10] Linde’s activities in South Africa are mainly focused on material handling ;
and engineering / plant construction . As already indicated above, Linde AG
offers the former product through its wholly owned subsidiary, Linde Material
Handling (Pty) Ltd (“LMH”), whilst the latter product is offered through Linde
Process Plants (Pty) Ltd (“LPP”), another Linde AG subsidiary. According to the
merging parties, Linde has no activity in South Africa that relates to industrial /
medical gases. It has only minor activities with regard to specialty gases . We
discuss below what each of these products entail.
[11] LMH operates as a sale and service organisation with a network of
branches and dealers throughout the Southern African region. LMH sells the
complete range of Linde material handling equipment which includes pallet
jacks and motorized pallet trucks, pallet stackers, reach trucks, electric counter
balance trucks, electric tow tractors, diesel and liquefied petroleum gas counter
balance trucks, container handlers and sideloaders. In addition to these
13 The merging parties submitted that whilst North America and Europe are still the largest and
second largest gas markets respectively, growth at a global level is largely driven by an
increasing demand in new markets in other parts of the world, such as Asia.
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products, LMG also offers an aftersales service to its customers. 14 LPP
provides business consultancy services to Linde AG in the field of
engineering.15
[12] In addition, Linde also designs and constructs turnkey plants. 16 We now
turn to consider Linde AG’s activities with respect to gases.
[13] The merging parties submitted that the local activities of Linde AG, with
respect to gases, is limited to sales of specialty gases, which in turn is limited to
four (4) gases, viz., ethylene (classified in the subcategory of chemical gases);
Xenon (a noble gas, which falls within the subcategory of lighting gases);
calibration gases; and propylene oxide (classified as a chemical gas). The
merging parties advised us that Linde AG’s sales of specialty gases to
customers are concluded directly between the local customer and Linde Gas in
Germany.
[14] BOC is involved in the production and distribution of industrial gases and
related equipment, distribution services and vacuum technology. It produces
and markets the main atmospheric gases 17 (nitrogen, oxygen and argon),
hydrogen, carbon dioxide, helium, acetylene, carbon monoxide, syngas (a
mixture of hydrogen and carbon monoxide), liquid petroleum gas and specialty
14 LMH’s afterservice sales service includes customer specific modifications of standard
equipment, full maintenance contracts, onsite technicians, annual load checks, short and long
term rentals and service and maintenance during shutdowns and over weekends.
15 The merging parties submitted that this was the only activity of LPP until late 2005.
16 The merging parties advised us that since late 2005, LPP has become involved in the
execution of an onshore contract with respect to the procurement and construction of a turnkey
plant for Sasol Olefins and Surfactants.
17 Atmospheric gases are extracted from the air mainly by using cryogenic air separation
technology. Nonatmospheric gases can be obtained from synthetic processes or natural
sources.
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gases.
[15] BOC’s operations in South Africa are conducted through the Afrox group
of companies 18 and through BOC Edwards South Africa. 19 These companies
are involved in a diverse range of business activities ranging from the
manufacturing and marketing of gases, welding products and a wide range of
specialised hightechnology industrial products.
Product Overlap
[16] Below is a summary in a table form, which reflects the merging parties’
activities relevant to South Africa.
PRODUCT LINDE AG BOC
Standard Industrial /
Medical Gases
Has no local activities in
this market segment
Is active in this market
segment
Helium Has no local activities in
this market segment
Is active in this market
segment
Engineering / Process
Plant Construction
Is active in this market
segment
Has no local or
international activities in
this market segment 20
Specialty Gases Is active locally in this
market segment
Also active locally in
this market segment
Material Handling Is active locally in this
market segment
Has no local or
international activities
18 Afrox’s business comprises: large supply schemes, bulk and tonnage business; industrial
products; LPG – mega bulk, industrial and household gas, and autogas; medical gases; special
gases including scientific gases, refrigerant gases and services, propellants and other packaged
chemicals and helium; hospitality gases; safety business including safety products and services;
manufacturing and export of gas equipment, welding and safety products; as well as African
operations. See Afrox’s Annual Report and Financial Statements for 2005, page 7.
19 The BOC Edwards business segmentation predominantly involves the manufacture,
distribution and marketing of gases, slurry exhaust management products, instrumentation and
control systems, vacuum pumps, coating systems, temperature and control systems, heat
exchangers and leakdetection systems, and the rendering of ancillary services to the
semiconductor industry and the vacuum products used in other industries. Through BOC
Edwards Pharmaceutical Systems, BOC Edwards also caters for the pharmaceutical industry.
The BOC Pharmaceutical products are tailored for the specific requirements of each of BOC
Edwards’ pharmaceutical customers and mainly relates to injectable products, freezedrying
systems and sterilising and packaging solutions.
20 The merging parties advised us that BOC sold its business in this segment to a joint venture
(Linde BOC Process Plants LCC) in which both parties are shareholders. Linde has sole control
over the joint venture, which conduct its activities from its head office in the United States.
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[17] What one sees from the above table is that the businesses of Linde AG
and BOC (within South Africa) mainly overlap in the production and supply of
‘specialty gases’.21 The merging parties contended that within this ‘specialty
gases’ market segment, the overlaps are limited to the sale of ethylene 22 and
calibration gases. They further contended that whilst both parties are involved in
the ‘specialty gases’ market segment locally, Linde AG has de minimis local
activities in this market segment. Linde AG has no local South African sales
office. According to the merging parties, Linde AG’s minor sales to South
African customers are concluded directly between local customers and Linde
Gas Germany. It appears that these gases are procured from overseas and are
shipped to South Africa by sea and/or air freight.
[18] Following its enquiries, the Commission found and submitted that each of
ethylene and calibration gases are not substitutable and therefore constitutes a
distinct and separate market due to their unique chemical and physical
21 The merging parties submit that while a large number of different gases, and gas mixtures
are generally referred to as “specialty gases”, there is no clear definition of ‘specialty gases’.
They further submitted that the ‘specialty gases’ category comprises all gases that are not
“industrial gases”. See also the EC decision, of 6 June 2006, which involves Linde AG and BOC
– Case No COMP/M4141 Linde/BOC at paras. 1619.
22 According to the Commission, ethylene gas is an odourless, flammable and colourless gas
with a melting point of 169 °C and a boiling point of 105 °C. And that it is also slightly soluble in
most organic solvents and possesses a unique boiling point, and as opposed to other non
hydrocarbon gases is flammable. The Commission says that ethylene is a plant hormone which
hydrocarbon gases is flammable. The Commission says that ethylene is a plant hormone which
is released by plants that are approaching maturity, and can also be used as a ripening agent of
plants. Ethylene is also used as a manufacturing input product within the petrochemical industry
in the production of hydrocarbon fuels. See page 16 of the Commission Recommendation.
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composition, their utility and application. 23
Geographic market
[19] The parties submit that the relevant geographic market for the production
and distribution of calibration gases and ethylene gas is global. In support of
their view, the merging parties indicated that “on a worldwide basis, the parties’
activities are complementary in terms of geography and that while both parties
are major players in the global gases business, BOC has a strong focus on
growth markets such as Asia, where Linde has limited or no presence.” They
further submit that transportation costs are low by comparison and do not add
significantly to the total purchase price. It also appears that specialty gases can
profitably be shipped over long distances and their distribution normally does
not require a decentralised distribution network. 24 In light of the above, the
Commission concluded that the markets for the manufacture and distribution of
ethylene and calibration gases are global.
Competition analysis
[20] As pointed out above, there appears to be a horizontal overlap between
the merging parties’ respective gases businesses. However, such an overlap
23 To this end, the Commission contacted competitors as well as the customers of the merging
parties who all confirmed that calibration gases and ethylene could not be substituted by any
other gas given their unique characteristics and that they are required to strictly conform to a
particular customer’s specifications. We also note that the industry generally shares the view
that each gas constitutes a separate product market, and that customers generally do not
consider substitution to be a realistic option with regard to gases. See also pages 827, 863, 849
and 870 of the merger record.
24 See page 79 of the merger record.
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appears to be limited to the sale of ethylene and calibration gases. The merging
parties advised us that Linde AG has had de minimis sales of these products
into South Africa. They further provided us with the estimated market shares
below in relation to the aforesaid affected products.
[21] With regards to the sale of calibration gases in South Africa , the merging
parties market shares estimates are as follows: Air Liquide (28%); Air Products
(28%); BOC (48%); and Others (including Linde AG) <1. 25 Since the
Commission defined the geographic market with respect to calibration gases as
global in nature, the Commission contended that the combined market shares of
the merged entity would be significantly diluted as follows: Air Liquide (30%); Air
Products (24%); PraxAir (10%); BOC (7%); Linde (6%); and Others (23%). 26
[22] One sees from the above market share estimates that the merging
parties would become the world’s number three (3) player with postmerger
market shares of approximately 13%. Air Liquide and Air Products – both being
the merging parties’ competitors – will have 30% and 24% of the market shares
respectively. We now turn to consider the market for the manufacture and
25. The merging parties submitted that Linde AG is unable to provide any reliable market share
estimates concerning specialty gases in South Africa since this information is allegedly not
available in the public domain and also because Linde has no local South African sales office.
However, they argue that the turnover derived by Linde AG in South Africa in respect of sale of
specialty gases (which overlaps with those sold by BOC) is insignificant. BOC also submitted
that given the unavailability of public information with regards to the sales of specialty gases in
or into South Africa, BOC could not provide reliable market shares figures. Nonetheless the
or into South Africa, BOC could not provide reliable market shares figures. Nonetheless the
merging parties submit that their estimates of market shares are predicated on BOC’s (and,
where applicable, the Afrox group of companies) knowledge of the specialty gases sector in
South Africa. See page 87 of the merger record.
26 See page 938 of the merger record.
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supply of ethylene gas.
[23] With regards to the market for the manufacture and supply of ethylene in,
into or from South Africa, the merging parties submitted that BOC did not derive
any turnover thereof for the 2005 financial year. However, BOC pointed out that
it is currently selling ethylene into South Africa and shall continue to do so post
merger. BOC considers Air Liquide as its primary competitor pertaining to
ethylene sales in South Africa. Linde AG also sells ethylene in South Africa.
BOC estimates Linde AG’s market shares to be less than 1%, but was unable to
provide us with the market share estimates for Air Liquide. The Commission
asserted that Linde AG’s market shares might be diluted further since its view is
that the geographic market for ethylene gas is global. Further to this, the
merging parties submitted their estimates of the market shares for the global
market of ethylene gas as follows: Ballchem (45%); Chemogas (comprising
Linde AG’s sales) (15%); Gerlingholz (15%); Avantec (10%); BOC <1%; and
Others (15%). 27
[24] During its investigation, the Commission contacted and received views of
the merging parties’ customers with respect to the proposed merger. None of
the customers raised any concerns with respect to the proposed merger. 28 We
27 BOC estimates its global market share at approximately 1% given that BOC does not sell
ethylene into the USA and has minor sales into Asia. See page 938 of the merger record.
28 For example, one customer [confidential] indicated that it has a five (5) year contract with
Afrox which runs until May 2011 and whose price adjustments are linked to indices and
contractually agreed to by both parties. Such customer expects the merged firm to honour this
agreement. It also indicated that it does not consider ‘switching a supplier’ to be a viable option.
Another customer of the merging parties indicated that “whilst it is possible to switch between
11
now turn to consider the likely impact or otherwise of the proposed merger to
the ethylene market.
[25] With regards to the ethylene gas market, the Commission’s investigation
revealed that the merging parties’ market share is less than 1%. In addition, the
merging parties contended that there are other suppliers in this market, such as
Air Products and Air Liquide. The Commission’s investigation also revealed that
it is possible to switch from one supplier to another.
[26] The merging parties contended that there are no regulatory barriers to
entry into the gases business that prevent or restrict crossborder sales of
specialty gases. According to the merging parties, a new entrant does not need
significant investment to venture into these markets. They submitted that there
have been a number of entrants recently in the specialty gases market
internationally, but not in South Africa. These customers of specialty gases
include multinational companies many of whom have a multisourcing policy in
place.29 This, in our view, suggests that these customers may readily and easily
switch between various suppliers of specialty gases.
Public Interest
the suppliers of calibration gases, it is unlikely that it will do so” . It further indicated that although
there are other two local suppliers (in the form of Air Products and Air Liquide) of calibration
gases, however, it does have the ability to negotiate competitive prices with Afrox for the supply
of the calibration gases (which view the Commission supported), and that it also regards the
calibration gases contract as a low annual value. See pages 840 and 850 of the merger record.
29 See pages 5860 as well as pages 8283 of the merger record.
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[27] The merging parties submitted that Linde has no physical presence
locally in relation to gases. However, we note that Linde has two local
subsidiaries that deal with material handling and process plants. The merging
parties submitted that the proposed transaction would not have an impact on
the business or employment levels of either of Linde’s local subsidiaries. 30 They
also submitted that they anticipate no job losses on any of BOC employees in
South Africa or the employees of any of BOC’s subsidiaries (including Afrox) in
South Africa. 31
Conclusion
[28] In light of the reasons set out above, we are satisfied that the proposed
transaction is unlikely to result in a substantial prevention or lessening of
competition in the relevant markets. We accordingly approve the proposed
transaction unconditionally.
______________
N Manoim
Presiding Member
L Reyburn and M Mokuena concurring.
Tribunal Researcher: T Masithulela
For Linde AG : K de Kock ( Webber Wentzel Bowens)
For BOC Plc : M. Garden ( Edward Nathan Corporate Law
30 According to the merging parties, LPP which is one of the two local subsidiaries of Linde
has two employees. See page 40 of the merger record.
31 See page 42 (as well as page 69) of the merger record.
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Advisors)
For the Commission : T Kekana (Mergers & Acquisitions)
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