HARDENED FRONTS Linde Faces Showdown Vote on Praxair Merger

German chemical giant Linde is no closer to approving the $65 billion merger with US Praxair. A fruitless supervisory board meeting on Thursday failed to convince the staunchly opposed works council. Now all eyes are on a showdown vote in May.
Munich-based chemical group Linde's management wants the tie-up with US rival Praxair. But its workers council is not amused. Picture source: Reuters

Thursday's supervisory board meeting at industrial chemical group Linde was meant to calm the waters ahead of a May 3 vote to approve the $65 billion merger with US rival Praxair. But instead, fronts have hardened even more.

Linde's powerful workers council, enraged by Chairman Wolfgang Reitzle's promise to make use of his casting vote to push the deal through, did not budge in its opposition to the merger.

"Essentially, nothing has changed," a source on the supervisory board told news agency Reuters. "No concessions were made," the source was quoted as saying.

Worker representatives of the Munich-based company, who have to approve the deal and control half the seats on the company’s non-executive or supervisory board, fear the merger will lead to job losses.

"As it looks today, everything is pointing toward a showdown on May 3," the source told Reuters, referring to the planned supervisory board vote ahead of the company's annual shareholder meeting on May 10.

Mr. Reitzle should know better. If he is not capable of that, the question arises over whether he is the right one for Linde. Jürgen Wechsler, Head of Bavaria's IG-Metall union

While labor representatives initially agreed to it, they have come to reject the deal as the headquarters of the future holding company will be outside of Germany, limiting German workers' influence. If this merger goes through, Praxair Chief Executive Steve Angel will head up the newly enlarged group out of the United States.

Labor and capital are represented equally on the supervisory boards of German listed companies. In the event of a deadlock, the chairman has a casting vote and Mr. Reitzle has made no secret of his intent to use it.

But sources familiar with the company doubt that Mr. Reitzle will ultimately push the merger through in the face of labor opposition, Handelsblatt has learned. After all, a  merger as large Linde-Praxair requires the support of the employees as well.

Asked about whether he could see the deal pushed through despite resistance from labor representatives, Linde Chief Executive Aldo Belloni said: "No, that would be bad."

Making use of the casting vote is considered an affront in Germany, where union and labor rights are cherished. Only four years ago, Mr. Reitzle said in an interview that the biggest mistake of his career was not taking BMW's workers council seriously. He had worked there for 23 years.

Union representatives in Bavaria, the home state of Linde, are even calling Mr. Reitzle into question altogether. "To be hell-bent on getting one's own way is the opposite of workers' participation," said the head of Bavaria's IG Metall union, Jürgen Wechsler, who is not a member of Linde's supervisory board.

"Mr. Reitzle should know better. If he is not capable of that, the question arises over whether he is the right one for Linde," Mr. Wechsler said.

But union representatives are still hoping to sway the capital side on the board. "I cannot imagine that the highly experienced and merited capital representatives on the supervisory board will allow themselves to be used by Mr. Reitzle in such a situation," Mr. Wechsler told Reuters.

Chairman Mr. Reitzle is under additional pressure from an investigation by Germany's financial watchdog BaFin for insider trading. He is suspected of having bought nearly half a million euros in Linde shares only two weeks before the merger talks became public.

The watchdog concluded its months-long investigations and forwarded its findings to the Munich prosecutor's office. The office is evaluating the findings and is expected to respond to the accusations on Friday.

Chief Prosecutor Hildegard Bäumler-Hösl said Mr. Reitzle didn't display any secretive behavior. "He didn't keep anything secret and reported [everything] to BaFin," Ms. Bäumler-Hösl said, adding that initial merger talks in September had collapsed anyway. A spokesman told Handelsblatt Mr. Reitzle was confident he will be able to answer all questions and that he was fully cooperative.

 

Axel Höpner is head of the Handelsblatt office in Munich, focusing on the state of Bavaria's companies, including Allianz and Siemens. Thomas Jahn is Handelsblatt's New York bureau chief. Volker Votsmeier is an editor with Handelsblatt's investigative reporting team. To contact the authors: [email protected][email protected][email protected][email protected]