Shares of Praxair Inc. (NYSE:PX) are up 5% in afternoon trading on Tuesday after the company confirmed that it is engaged in preliminary merger talks with German company Linde AG (DE:LING).
Based in Danbury, CT, Praxair is an industrial gas company that produces, sells, and distributes atmospheric, process and specialty gases, as well as surface coatings.
In late July, the company reported its Q2 earnings, posting $1.39 in earnings per share and $2.67 billion in revenue. These beat our Zacks Consensus Estimates of $1.35 and $2.61 billion respectively.
As our team has discussed, use of industrial gases has been on the rise across various industries, including refining, healthcare, oil, and gas, amongst others. Praxair was busy in Q2, acquiring the European Carbon dioxide business of Yara International ASA along with five other industrial gas companies.
A merger with Linde AG would create a company with a combined market cap of over $60 billion. Considering the currency headwinds and decreased economic growth that the industrial gas industry has faced recently, a merger could grant the two companies some needed stability.
Reuters reports that it is currently unclear whether a potential deal would be a merger of equals or one company buying out the other. It also mentions that Markus Meyer, an analyst at Baader Helvea, stated that overlaps between the two companies around the world could help generate synergies of up to €800 million.
As stated, talks are still in very early stages, so it is quite possible that the companies will not come to an agreement.
In the days since its earnings report, Praxair has seen downward earnings estimates for the foreseeable future. Current quartet estimates stand at $1.41 per share, down from the $1.44 estimate of 30 days ago, while full-year estimates slipped three cents to $5.53.
Praxair Inc. currently sits at a Zacks Rank #3 (Hold).
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