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Monday, June 21, 1999 Published at 13:40 GMT 14:40 UK

Business: The Company File

BOC rejects takeover bid

Industrial gases have been hit by the manufacturing recession

BOC has rejected a joint takeover approach from two rivals in a move expected to kick off a bidding war for the British industrial gases firm.

The approach from the French group Air Liquide and the US company Air Products comes after the breakdown of merger talks between BOC and Praxair.

[ image: Gases play a vital role in refrigerated transport]
Gases play a vital role in refrigerated transport
The two rivals are reportedly offering 14.20 a share, valuing BOC at 6.9bn ($11bn), a substantial premium above its current share price of 12.40.

Industry sources said BOC had declined the offer because it feared being broken up.

In a statement, BOC said the deal would not be in the interests of customers, shareholders or employees.

The company also confirmed that it was not currently in any talks that may lead to a "business combination."

"The bad news is that all the talks failed. The good news is that BOC is now in play," said Philip Morrish of Paribas.

Shares in BOC ended up 44p at 12.65 after earlier reaching a record high of 12.80.

French rival Air Liquide said it had been in contact with BOC over a possible merger.

"These contacts led to several propositions from Air Liquide which have not been accepted by BOC's board," the company said in a brief statement.

Shares in Air Liquide rose 4.82% to 148 euros ($153) on hopes it would end up in a value-enhancing deal with BOC.

Need for consolidation

A merger between the three groups would create the world's largest industrial gases group.

But parts of BOC would have to be broken up to satisfy concerns about competition.

As well as a 60% share of its home market, BOC has a strong position in United States, Australia, Asia, and South Africa.

Air Liquide is the world's largest industrial gas producer, with 17% of the market, while Air Products has 8%.

The industrial gas market has been hit by the worldwide slowdown in manufacturing, and the leading companies have all been looking towards consolidation to maintain profits.

Control issues

BOC's talks with Praxair reportedly broke down over the issue of management control.

BOC chief executive Danny Rosencranz was thought to be unwilling to cede control to Praxair chairman William Lichtenberger.

But a Praxair merger would not create as many regulatory issues as the proposed joint takeover, as there is relatively little overlap between the two businesses.

BOC employs 35,000 people in 60 countries, with sales of 3.5bn ($6.5bn)

Its products are used in everything from the production of computer chips and packaging to medicine and food manufacture.

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