EX-99.1 4 d643979dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document, or as to what action you should take, you are recommended to immediately consult, if you are resident in Ireland, an organization or firm authorized or exempted pursuant to the European Union (Markets in Financial Instruments) (Amendment) Regulations 2017 or the Investment Intermediaries Act 1995 (as amended), and, if you are in a territory outside Ireland, another appropriately authorized professional advisor.

This document constitutes a prospectus (the “Prospectus”) for the purposes of Article 3 of the European Parliament and Council Directive 2003/71/EC of 4 November 2003 (the “Prospectus Directive”) relating to Linde plc (“Linde plc”) and has been prepared in accordance with Chapter 1 of Part 23 of the Companies Act 2014 (the “Companies Act”), the Prospectus (Directive 2003/71 EC) Regulations 2005 of Ireland, as amended (the “Irish Prospectus Regulations”) and Commission Regulation (EC) No 809/2004 of 29 April 2004, as amended (the “EU Prospectus Regulation”). The Prospectus has been filed with and approved by the Central Bank of Ireland (the “Central Bank”), as competent authority under the Prospectus Directive. The Central Bank only approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive. Such approval relates only to the Linde plc Shares (as defined herein) which are to be admitted to trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard). Linde plc has requested that the Central Bank provides the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – “BaFin”) in Germany and the European Securities Market Authority with a certificate of approval attesting that this Prospectus has been drawn up in accordance with the Prospectus Directive.

This Prospectus has been prepared in connection with Linde plc’s applications to the Frankfurt Stock Exchange for the Linde plc Shares to be admitted to trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) (the “Admission”). Application was made accordingly to the Frankfurt Stock Exchange. It is expected (i) that (A) 263,147,436 Linde plc Shares intended for the settlement of the Exchange Offer (as defined below) will be admitted to trading on the Frankfurt Stock Exchange on or about the fourth business day prior to, and (B) up to 295,000,000 Linde plc Shares intended for the settlement of the Merger (as defined below) will be admitted to trading on the Frankfurt Stock Exchange on, the effective date of (x) the merger of an indirect subsidiary of Linde plc with and into Praxair, Inc. (“Praxair, Inc.” and, together with its subsidiaries, “Praxair”), as a result of which Praxair, Inc. will become a wholly-owned indirect subsidiary of Linde plc (the “Merger”) and (y) a voluntary public exchange offer, which was published by Linde plc on August 15, 2017, to acquire each outstanding share in Linde Aktiengesellschaft (“Linde AG” and, together with its subsidiaries, “The Linde Group”) (the “Linde AG Shares”) for 1.540 ordinary shares in Linde plc (the “Linde plc Shares”) (the “Exchange Offer” and, together with the Merger, the “Business Combination”) and (ii) that trading in the Linde plc Shares will commence on the Frankfurt Stock Exchange on or around the second business day prior to the effective date of the Business Combination.

 

 

 

LOGO

Linde plc

(incorporated and registered in Ireland under the Companies Act with registered number 602527)

Proposed admission to the regulated market (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of up to 558,147,436 ordinary shares of €0.001 each in the share capital of Linde plc

Credit Suisse

Listing Agent

 

 

This Prospectus has been made available to the public in Ireland and Germany in accordance with Part 8 of the Irish Prospectus Regulations by the same being made available, free of charge, in electronic form on the website of the Central Bank. No materials, including any information on the website of the Central Bank, on Linde plc’s, Praxair’s or The Linde Group’s respective websites, are incorporated into this Prospectus by reference and such materials do not form part of this Prospectus.

Linde plc and its directors whose names are set out in section “10.6.3.1 Composition“ of this Prospectus (the “Directors”), accept responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of Linde plc and the Directors (each of whom has taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and contains no omission likely to affect the import of such information.

You should read this Prospectus in its entirety. Your attention is specifically drawn to the risk factors set out in the section entitled “Risk Factors” in PART II of the Prospectus.


No person has been authorized to give any information or to make any representations other than those contained in this Prospectus and, if given or made, such information or representations must not be relied on as having been so authorized. Any delivery of this Prospectus shall not, under any circumstances, create any implication that there has been no change in the affairs of Linde plc and its subsidiaries (the “Linde plc Group”), Praxair, The Linde Group and/or the Linde plc Group, Praxair and The Linde Group taken as a whole (the “Combined Group”) since, or that the information contained herein is correct at any time subsequent to, the date of this Prospectus. Linde plc will comply with its obligation to publish a supplementary prospectus containing further updated information if so required by law or by any regulatory authority but assumes no further obligation to publish additional information. The contents of this Prospectus are not to be construed as legal, financial or tax advice. Each recipient of this Prospectus should consult his, her or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice.

This Prospectus does not constitute an invitation or offer to sell or exchange, or the solicitation of an invitation or offer to buy, exchange or subscribe for any security or to become a shareholder of Linde plc. It has been prepared solely for the purpose of the Admission (as required by Article 3(3) of Directive 2003/71/EC of the European Parliament and of the Council, Section 3(4) of the German Securities Prospectus Act and Section 32(3) no. 2 of the German Stock Exchange Act and in accordance with Chapter 1 of Part 23 of the Companies Act, the Irish Prospectus Regulations and the EU Prospectus Regulation). The distribution of this Prospectus in certain jurisdictions may be restricted by law and, accordingly, persons into whose possession this Prospectus comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction for which Linde plc and the Listing Agent disclaim all responsibility. No action has been, or will be, taken by Linde plc to permit a public offering of the Linde plc Shares, or to permit the possession or distribution of this Prospectus (or any other offering or publicity materials relating to the Linde plc Shares) in any jurisdiction where any action that has not been taken by Linde plc, may be required for that purpose.

The language of this Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law.

Certain terms used in this Prospectus, including certain technical and other items, are explained and defined in PART XXI (Definitions and Glossary) of this Prospectus.

This Prospectus is dated October 24, 2018.

 

-ii-


TABLE OF CONTENTS

 

PART I SUMMARY OF THE PROSPECTUS

     1  

PART II RISK FACTORS

     38  

PART III IMPORTANT INFORMATION

     69  

PART IV GENERAL INFORMATION ABOUT THE LINDE PLC SHARES AND THE ADMISSION

     75  

PART V THE BUSINESS COMBINATION

     79  

PART VI DIVIDEND POLICY

     91  

PART VII CAPITALIZATION AND INDEBTEDNESS

     94  

PART VIII UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     96  

PART IX SELECTED FINANCIAL INFORMATION OF LINDE PLC

     118  

PART X BUSINESS AND CERTAIN INFORMATION ABOUT LINDE PLC

     119  

PART XI INDUSTRY OVERVIEW

     139  

PART XII BUSINESS AND CERTAIN INFORMATION ABOUT PRAXAIR

     141  

PART XIII SELECTED HISTORICAL FINANCIAL INFORMATION OF PRAXAIR

     183  

PART XIV OPERATING AND FINANCIAL REVIEW OF PRAXAIR

     185  

PART XV BUSINESS AND CERTAIN INFORMATION ABOUT THE LINDE GROUP

     231  

PART XVI SELECTED HISTORICAL FINANCIAL INFORMATION OF THE LINDE GROUP

     260  

PART XVII OPERATING AND FINANCIAL REVIEW OF THE LINDE GROUP

     263  

PART XVIII REGULATORY ENVIRONMENT

     299  

PART XIX TAXATION

     311  

PART XX ADDITIONAL INFORMATION

     325  

PART XXI DEFINITIONS AND GLOSSARY

     344  

PART XXII INDEX TO LINDE PLC FINANCIAL STATEMENTS

     F.1-1  

PART XXIII INDEX TO PRAXAIR, INC. FINANCIAL STATEMENTS

     F.2-1  

PART XXIV INDEX TO LINDE AG FINANCIAL STATEMENTS

     F.3-1  

SCHEDULE I REPORT ON THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     R-1  

SCHEDULE II GERMAN TRANSLATION OF THE SUMMARY OF THE PROSPECTUS ZUSAMMENFASSUNG DES PROSPEKTS

     S-1  

 

-iii-


PART I

SUMMARY OF THE PROSPECTUS

Summaries are made up of disclosure requirements known as “Elements”. These Elements are numbered in Sections A–E (A.1–E.7).

This summary contains all the Elements required to be included in a summary for this type of securities and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.

Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of “not applicable”.

 

Section A — Introduction and Warnings
A.1    Warnings.   

This summary should be read as an introduction to this Prospectus. Any decision to invest in the shares of Linde plc should be based on consideration of the Prospectus as a whole by the investor.

 

Where a claim relating to the information contained in this Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the member states of the European Economic Area, have to bear the costs of translating this Prospectus before the legal proceedings are initiated.

 

Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with other parts of the Prospectus, key information necessary for investors when considering whether to invest in such securities.

A.2    Information regarding the subsequent use of the prospectus.    Not applicable. No consent has been given by Linde plc to the use of the Prospectus for subsequent resale or placement of securities by financial intermediaries. Linde plc is not engaging any financial intermediaries for any resale or placement of securities in connection with this Prospectus.
Section B — Issuer
B.1    Legal and commercial name of the issuer.    The issuer’s legal name is “Linde Public Limited Company”. As of the date of the publication of the Prospectus, Linde plc does not use a commercial name different from its legal name.
B.2    Domicile, legal form, legislation under which the issuer operates, country of incorporation.    Linde plc is a public limited company formed under the laws of Ireland and has its registered office at Ten Earlsfort Terrace, Dublin 2, D02 T380, Ireland, and its principal executive offices at The Priestley Centre, 10 Priestley Road, The Surrey Research Park, Guildford, Surrey GU2 7XY, United Kingdom, and is registered with the Irish Companies Registration Office, under entity number 602527. Linde plc is also registered in the United Kingdom as an overseas company with number FC034479 and its UK establishment is registered at the principal executive offices of the company with registration number BR019569. Linde plc is, and will be following completion of the Business Combination (as defined in B.3 below), subject to Irish law, including the Companies Act 2014.


 

1


Section B — Issuer
B.3    Current operations and principal business activities and principal markets in which the issuer competes.   

Linde plc

 

Linde plc was formed solely for the purpose of effecting the business combination comprising the merger of an indirect subsidiary of Linde plc with and into Praxair, Inc. (“Praxair, Inc.” and, together with its subsidiaries, “Praxair”), as a result of which Praxair, Inc. will become a wholly-owned indirect subsidiary of Linde plc (the “Merger”) and a voluntary public exchange offer, which was published by Linde plc on August 15, 2017, to acquire each outstanding share in Linde Aktiengesellschaft (“Linde AG” and, together with its subsidiaries, “The Linde Group”) (the “Linde AG Shares”) for 1.540 ordinary shares in Linde plc (the “Linde plc Shares”) (the “Exchange Offer” and, together with the Merger, the “Business Combination”). To date, Linde plc has not conducted any material activities other than those in connection with its formation and the matters contemplated by the business combination agreement dated June 1, 2017, as amended by amendment no. 1 to the Business Combination Agreement dated August 10, 2017, between Praxair, Inc., Linde AG, Linde plc, Zamalight Holdco LLC, a limited liability company incorporated under the laws of Delaware (“Zamalight Holdco”) and Zamalight Subco, Inc., a corporation incorporated under the laws of Delaware (“Merger Sub”) as applicable from time to time (the “Business Combination Agreement”) (including guarantees related to divestitures in connection with the Business Combination).

     

The Combined Group

 

The combined group of Praxair, The Linde Group and the Linde plc Group (the “Combined Group”) will be established as a result of the completion of the Business Combination.

 

In Linde plc’s view, the Business Combination will bring together two leading companies in the global industrial gases industry, leveraging the proven strengths of each. Linde plc believes the transaction will combine The Linde Group’s long-held expertise in technology with Praxair’s efficient operating model, thus creating a global leader. The Combined Group is expected to enjoy strong positions in key geographies and end markets and will create a more diverse and balanced global portfolio.

 

Praxair

 

Praxair, Inc., a corporation under the laws of Delaware, was founded in 1907 and has been an independent listed company since 1992. Praxair believes it is a leading industrial gas company in North and South America and one of the largest worldwide, based on 2017 revenue. It continues to be a major technological innovator in the industrial gases industry. Its primary products in its industrial gases business are atmospheric gases (oxygen, nitrogen, argon, and rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, and acetylene). Praxair serves a diverse group of industries including healthcare, petroleum refining, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals and water treatment. Praxair also designs, engineers and builds equipment that produces industrial gases primarily for internal use. Praxair’s surface technologies segment supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders.



 

2


Section B — Issuer
      Approximately 57% of Praxair’s 2017 sales were outside of the United States. The majority of its revenues and earnings are generated in 12 core geographies: United States, Canada, Mexico, Brazil, Spain, Italy, Germany / Benelux, Scandinavia, China, India, Korea and Thailand.
     

The Linde Group

 

Linde AG was founded in 1879. The Linde Group is a gases and engineering group operating globally and, one of the largest worldwide (according to “Gas Report: Global Market 2017” published by Gasworld Ltd., Cornwall, United Kingdom, based on market share in 2016). The Linde Group offers a wide range of compressed and liquefied gases as well as chemicals and is a partner for a variety of industries. The Linde Group’s gases, such as oxygen, nitrogen, hydrogen, helium and specialty gases, are used, for example, in the energy sector, steel production, chemical processing, environmental protection and welding, as well as in food processing, glass production, electronics and in the healthcare sector. The Linde Group is also active in the sale of products in the field of medical technology, of pharmaceutical products and of other products in the healthcare area. The Linde Group’s engineering business includes the technology, engineering, procurement, project management and construction of industrial plants. The Linde Group’s plants are used in a wide variety of fields such as the petrochemical and chemical industries, refineries and fertilizer plants, to recover air gases, to produce hydrogen and synthesis gases and to treat natural gas.

 

The Linde Group has two divisions, the Linde Gases Division and the Linde Engineering Division. The Linde Group’s largest division, the Linde Gases Division, is active in approximately 100 countries, divided over three geographic reporting segments: EMEA (Europe, Middle East and Africa), Asia/Pacific, and the Americas. The Linde Engineering Division is active across the globe and ranks among the leading process plant contractors.

B.4a    Most significant recent trends affecting the issuer and the industry in which it operates.    As the global economy continues to expand, demand is also expected to grow for metals, refined petroleum products, chemicals, manufactured goods and other products, which is in turn expected to increase demand for industrial gases. Additionally, future growth in the industrial gases industry is expected to be driven by the expansion of developing economies, continued growth of the electronics industry, as well as growth of the energy sector. Specifically, the opportunity provided by the shale gas and oil expansion in the United States is expected to continue to drive significant growth in the U.S. Gulf Coast region. This has boosted capital investment in the region and is resulting in the expansion of petro-chemical manufacturing capacity. Other major macro trends, including aging population, further expansion of clean energy technologies, technological innovations and digitalization, are expected to have positive impacts in the long term demand for industrial and medical gases. As a result of the Business Combination, the Combined Group is expected to be better positioned to capitalize on these opportunities, benefiting from a larger global footprint, wide-ranging application technologies and world class engineering expertise.


 

3


Section B — Issuer
      For further recent trends related to Praxair’s and The Linde Group’s results of business, see Element B.7 below.
B.5    Description of the group and the issuer’s position within the group.   

Linde plc is a public limited company formed under the laws of Ireland solely for the purpose of effecting the Business Combination.

 

Following the completion of the Business Combination, Linde plc will be the ultimate holding company of the Combined Group, which will operate through its subsidiary undertakings, Linde AG and Praxair, Inc. Linde AG and Praxair, Inc. will continue to be the holding companies of The Linde Group and Praxair, respectively.

B.6    Persons who, directly or indirectly, have a (notifiable) interest in the issuer’s capital or voting rights or have control over the issuer.   

As of the latest practicable date prior to the date of this Prospectus, i.e., October 22, 2018 (the “Latest Practicable Date”), Enceladus Holding Limited, a private company limited by shares formed under the laws of Ireland and having its registered address at Ten Earlsfort Terrace, Dublin 2, Ireland (“Enceladus”) is the only shareholder of Linde plc, holding 25,000 A ordinary shares of €1.00 each in the capital of Linde plc. Enceladus is owned by Praxair’s Irish legal counsel.

 

Linde plc is not aware that upon completion of the Business Combination it will be directly or indirectly controlled. Based on the assumptions that (i) immediately following the completion of the Business Combination, 558,147,436 Linde plc Shares will be outstanding as a result of the Merger and the acceptance of the Exchange Offer for approximately 92% of all Linde AG Shares, (ii) the publicly filed holdings of beneficial owners of Praxair, Inc. and Linde AG (as set forth below) remain unchanged, and (iii) all Linde AG Shares held by such beneficial holders were tendered in the Exchange Offer, Linde plc expects that the following persons will beneficially own 3% or more of Linde plc Shares (each Linde plc Share having one vote at general shareholder meetings) immediately following the completion of the Business Combination:

 

Name and Address of Beneficial Owner

   Number of
Ordinary
Shares*
     Percentage  

BlackRock, Inc., 55 East 52nd Street, New York, NY 10055, United States

     33,152,893        5.9

Eric W. Mandelblatt, Soroban Capital GP LLC, 444 Madison Avenue, New York, New York 10022, United States

     26,848,752        4.8

The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 19355, United States

     21,606,823        3.9

Capital World Investors, 333 S. Hope Street, Los Angeles, CA 90071, United States

     20,061,192        3.6

 

*

Includes voting rights through derivative instruments.



 

4


Section B — Issuer
    As of the Latest Practicable Date, the only beneficial owners of more than 5% of outstanding shares of Praxair, Inc. (the “Praxair Shares”) were the following:

 

Name and Address of Beneficial Owner

   Number of
Shares
Beneficially
Owned (a)
     Percent of
Shares

Outstanding (b)
 

The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 19355, United States

     21,606,823        7.5

Capital World Investors, 333 S. Hope Street, Los Angeles, CA 90071, United States

     20,061,192        7.0

BlackRock, Inc., 55 East 52nd Street, New York, NY 10055, United States

     17,780,636        6.2

 

(a)

Holdings as of December 31, 2017 as reported in SEC Schedules 13G filed by The Vanguard Group (“Vanguard”), Capital World Investors (“Capital World”), and BlackRock, Inc. (“BlackRock”). According to its Schedule 13G, Vanguard and certain of its affiliates had sole voting power as to 407,094 shares, shared voting power as to 69,828 shares, shared dispositive power as to 469,290 shares, and sole dispositive power as to 21,137,533 shares. According to its Schedule 13G, Capital World and certain of its affiliates had sole voting power as to 18,575,563 shares, and sole dispositive power as to all of the reported shares. According to its Schedule 13G, BlackRock and certain of its subsidiaries had sole voting power as to 15,389,271 shares, and sole dispositive power as to 17,780,637 shares.

(b)

Based on 287,575,784 total shares outstanding on June 30, 2018 excluding shares held for the account of Praxair, Inc.

 

    The following table sets forth the beneficial ownership of voting rights of at least 3% for Linde AG Shares under Sections 33 et seq. of the German Securities Trading Act. The following information is based on the information published by Linde AG on the website http://www.the-linde-group.com/de under the section Investor Relations/Linde Shares/Voting Rights Notifications as of the Latest Practical Date:

 

Name and Address of Direct/Indirect Beneficial Owner

   Number of voting
rights attached to

shares and through
instruments
     Percentage
of

issued
shares
 

BlackRock, Inc., 55 East 52nd Street, New York, New York 10055, United States

     9,981,985        5.37

Eric Mandelblatt, Soroban Capital GP LLC, 444 Madison Avenue, New York, New York 10022, United States

     9,901,789        5.33

Norges Bank, Ministry of Finance of Norway on behalf of the State of Norway, Bankplassen 2, P.O. Box 1179 Sentrum, NO 0107, Oslo, Norway

     9,546,648        5.14

Massachusetts Financial Services Company (MFS), 111 Huntington Avenue, Boston, Massachusetts, 02116, United States

     9,240,255        4.98


 

5


Section B — Issuer
B.7    Selected key historical financial information.   

Linde plc

 

The following table sets forth selected historical consolidated financial information for Linde plc as of the end of and for the periods indicated and presented in accordance with IFRS based on the audited consolidated and parent company financial statements of Linde plc as of December 31, 2017 and for the period from April 18, 2017 (the date of Linde plc’s incorporation) through December 31, 2017 and the unaudited consolidated financial statements of Linde plc as of and for the six months ended June 30, 2018 (including the period from April 18, 2017 through June 30, 2017):

 

From the Consolidated Statement of Income / (Loss) and Other Comprehensive Income / (Loss)

 

In $

   January 1, 2018 -
June 30, 2018
     April 18, 2017
– June 30, 2017
     April 18, 2017 –
December 31, 2017
 

Other expenses

   $ 4,843,113      $ 462,640      $ 1,882,646  
  

 

 

    

 

 

    

 

 

 

Operating loss

     (4,843,113      (462,640      (1,882,646

Loss before tax

     (4,843,113      (462,640      (1,882,646

Income tax

     —          —          —    
  

 

 

    

 

 

    

 

 

 

Loss for the period

     (4,843,113      (462,640      (1,882,646

Other comprehensive income / (loss)

        

Other comprehensive income / (loss) for the period, net of tax

     112,566        2,506        (42,828
  

 

 

    

 

 

    

 

 

 

Total comprehensive loss for the period

   $ (4,730,547    $ (460,134    $ (1,925,474

Net loss per share – basic and diluted

   $ (193.72    $ (18.51    $ (75.31

Weighted average shares outstanding – basic and diluted

     25,000        25,000        25,000  

 

From the Consolidated Balance Sheet

 

In $

   June 30, 2018      December 31, 2017  

Assets

     

Current assets

     

Cash and cash equivalents

   $ 60,441      $ 84,862  

Receivables from shareholders

     58,420        60,025  

Other assets

     8,885,448        9,129,562  
  

 

 

    

 

 

 

Total assets

   $ 9,004,309      $ 9,274,449  
  

 

 

    

 

 

 

Shareholders’ equity and liabilities

     

Current liabilities

     

Accrued liabilities

   $ 2,632,774      $ 1,644,799  

Amounts due to related parties

     12,973,902        9,501,470  
  

 

 

    

 

 

 

Total liabilities

   $ 15,606,676      $ 11,146,269  
  

 

 

    

 

 

 

Capital and reserves

     

Share Capital (A ordinary shares of €1.00 each, authorized and issued shares - 25,000 shares)

   $ 26,827      $ 26,827  

Share premium

     26,827        26,827  

Other reserve

     69,738        (42,828

Retained loss

     (6,725,759      (1,882,646
  

 

 

    

 

 

 

Total equity

     (6,602,367      (1,871,820
  

 

 

    

 

 

 

Total equity and liabilities

   $ 9,004,309      $ 9,274,449  
  

 

 

    

 

 

 

 

   

To date, Linde plc has not conducted any material activities other than those in connection with its formation and the matters contemplated by the Business Combination Agreement (including guarantees related to divestitures in connection with the Business Combination). As such, there has been no significant change in the financial or trading position of the Linde plc Group during the six months ended June 30, 2018 or since June 30, 2018, except as described below.

 

On July 5, 2018, Praxair, Inc. entered into the Praxair Europe SPA and on July 16, 2018, Linde AG entered into the Americas SPA, which was amended on September 22, 2018 and October 19, 2018, each as described in more detail below. Under these agreements, Linde plc has guaranteed the full, due and timely performance and observance of all obligations of Praxair and Linde AG, respectively, under these agreements, effective as of the completion of the Business Combination.



 

6


Section B — Issuer
   

In the course of the merger control proceedings in the United States, Linde plc, Praxair, Inc. and Linde AG entered into an agreement with the U.S. Federal Trade Commission dated October 1, 2018 which provides for the divestitures under the Americas SPA and provides for certain additional divestiture commitments in the United States (the “Consent Agreement”). Under the Consent Agreement, Linde plc, Praxair, Inc. and Linde AG shall (i) continue to operate The Linde Group and Praxair as independent, ongoing, economically viable, competitive businesses held separate, distinct, and apart from each other’s operations; (ii) not coordinate any aspect of the operations of The Linde Group and Praxair, including the marketing or sale of any products; and (iii) maintain separate financial ledgers, books, and records that report on a periodic basis, consistent with past practices, the assets, liabilities, expenses, revenues, and income of each (such order, the “Hold Separate Order”). The Hold Separate Order applies globally and will only expire once certain divestitures have been completed.

 

On May 26, 2017, Linde plc formed Zamalight Holdco, a Delaware limited liability company. On July 26, 2017, Linde plc formed Linde Holding GmbH, a German limited liability company (Gesellschaft mit beschränkter Haftung) (“Linde Holding GmbH”), which on July 28, 2017, in turn formed Linde Intermediate Holding AG, a German stock corporation (Aktiengesellschaft) (“Linde Intermediate Holding AG”). On August 15, 2017, Linde plc published the Exchange Offer which had been accepted in respect of approximately 92% of the share capital of Linde AG by the end of the mandatory additional acceptance period on November 24, 2017.

   

Praxair

 

The following tables set forth selected historical consolidated financial information for Praxair as of the end of and for the periods indicated and presented in accordance with U.S. GAAP. This, if presented as “audited” is taken from the audited consolidated financial statements of Praxair, if presented as “unaudited”, is either (i) derived from the audited consolidated financial statements of Praxair, or (ii) taken or derived from the unaudited consolidated financial statements, the accounting records or management reporting, of Praxair. Historical operating results are not necessarily indicative of the results of operations for any future period.



 

7


Section B — Issuer

 

From the Consolidated Statements of Income and Equity

 
     Six Months Ended
June 30,
                   

$ in million (except per share data)

   2018 (a)     2017 (a)     2017 (b)     2016 (b)     2015 (b)  
     (unaudited)     (audited, unless otherwise
indicated)*
 

Sales

   $ 6,060     $ 5,562     $ 11,437     $ 10,534     $ 10,776  

Cost of sales, exclusive of depreciation and amortization

     3,400       3,148       6,455       5,860       5,960  

Selling, general and administrative

     617       595       1,207       1,145       1,152  

Depreciation and amortization

     622       579       1,184       1,122       1,106  

Research and development

     48       46       93       92       93  

Transaction costs and other charges

     43       21       54       100       172  

Other income (expenses) — net

     12       —         4       23       28  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     1,342       1,173       2,448       2,238       2,321  

Interest expense — net

     90       79       161       190       161  

Net pension and OPEB cost (benefit), excluding service cost**

     4       (13     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes and equity investments

     1,248       1,107       2,287       2,048       2,160  

Income taxes

     306       306       1,026       551       612  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before equity investments

     942       801       1,261       1,497       1,548  

Income from equity investments

     29       23       47       41       43  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (including noncontrolling interests)

     971       824       1,308       1,538       1,591  

Noncontrolling interests

     (29     (29     (61     (38     (44
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income — Praxair, Inc.

   $ 942     $ 795     $ 1,247     $ 1,500     $ 1,547  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per Share Data — Praxair, Inc. Shareholders

          

Basic earnings per share

   $ 3.27     $ 2.78     $ 4.36     $ 5.25     $ 5.39  

Diluted earnings per share

   $ 3.24     $ 2.76     $ 4.32     $ 5.21     $ 5.35  

Cash dividends per share

   $ 1.65     $ 1.575     $ 3.15     $ 3.00     $ 2.86  

Weighted average shares outstanding (000’s)

          

Basic shares outstanding

     287,654       285,799       286,261       285,677       287,005  

Diluted shares outstanding

     290,926       288,067       289,114       287,757       289,055  

 

*

Taken from Praxair’s audited consolidated financial statements as of and for the years ended December 31, 2017, 2016 and 2015.

**

Unaudited. In accordance with Accounting Standards Codification Update 2017-6 “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, Net pension and OPEB cost (benefit), excluding service cost is no longer accounted for as part of operating profit but has to be disclosed as separate item as from January 1, 2018. For the years ended December 31, 2017, 2016 and 2015 these costs were included in the calculation of operating profit.

 

Balance Sheet and Other Information and Ratios

 

$ in million

   June 30,
2018
     December 31,
2017
     December 31,
2016
     December 31,
2015
 
     (unaudited)      (audited, unless otherwise indicated)*  

Total assets

   $ 19,836      $ 20,436      $ 19,332      $ 18,319  

Total debt

   $ 8,458      $ 9,000      $ 9,515      $ 9,231  

Number of shares outstanding (000’s)

     287,576        286,777        284,901        284,879  

Number of employees**

     26,658        26,461        26,498        26,657  

 

*

Taken from Praxair’s audited consolidated financial statements as of and for the years ended December 31, 2017, 2016 and 2015.

**

Unaudited.

 

     Six Months Ended
June 30,
                   

$ in million

   2018     2017     2017     2016     2015  
     (unaudited)     (audited, unless otherwise
indicated)*
 

Cash flow from operations

   $ 1,478     $ 1,411     $ 3,041     $ 2,773     $ 2,695  

Net cash used for investing activities

   $ (607   $ (637   $ (1,314   $ (1,770   $ (1,303

Net cash used for financing activities

   $ (945   $ (780   $ (1,656   $ (643   $ (1,310

EBITDA(c)

   $ 1,993     $ 1,775     $ 3,679     $ 3,401     $ 3,470  

Adjusted EBITDA(c)

   $ 2,036     $ 1,796     $ 3,733     $ 3,501     $ 3,642  

Capital expenditures

   $ 676     $ 652     $ 1,311     $ 1,465     $ 1,541  

Acquisitions, net of cash acquired

   $ —       $ 2     $ 33     $ 363     $ 82  

 

*

Taken from Praxair’s audited consolidated financial statements as of and for the years ended December 31, 2017, 2016 and 2015.



 

8


Section B — Issuer

 

(a)

Amounts for the six months ended June 30, 2018 include $43 million ($39 million after-tax and non-controlling interests or $0.13 per diluted share) for transaction costs and other charges primarily in connection with the intended Business Combination and amounts for the six months ended June 30, 2017 include $21 million ($21 million after-tax or $0.07 per diluted share) of transaction costs related to the intended Business Combination.

(b)

Amounts for 2017 include: (i) charges of $52 million ($48 million after-tax, or $0.17 per diluted share) for transaction costs related to the potential Business Combination, (ii) a pension settlement charge of $2 million ($1 million after-tax) related to lump sum benefit payments made from an international pension plan, and (iii) income tax charges, net of $394 million ($1.36 per diluted share) due to U.S. Tax Cuts and Jobs Act.

Amounts for 2016 include: (i) a $16 million charge to interest expense ($10 million after-tax, or $0.04 per diluted share) related to the redemption of the $325 million 5.20% notes due 2017, (ii) a pre-tax pension settlement charge of $4 million ($3 million after-tax, or $0.01 per diluted share) related to lump sum benefit payments made from the U.S. supplemental pension plan, and (iii) pre-tax charges of $96 million ($63 million after-tax and non-controlling interests, or $0.22 per diluted share) primarily related to cost reduction actions.

Amounts for 2015 include: (i) a pre-tax charge of $165 million ($125 million after-tax, or $0.43 per diluted share) related to the cost reduction program and other charges; and (ii) a pre-tax charge of $7 million ($5 million after-tax, or $0.02 per diluted share) related to a pension settlement.

 

(c)

Unaudited. Non-GAAP performance measures. EBITDA and Adjusted EBITDA are used by investors, financial analysts and management to assess a company’s profitability. The following table presents the reconciliation from GAAP measures for the periods indicated:

 

EBITDA and Adjusted EBITDA

   Six Months Ended
June 30,
                     

$ in million

   2018      2017     2017      2016      2015  
     (unaudited)     (audited, unless otherwise
indicated)*
 

Net income - Praxair, Inc.

   $ 942      $ 795     $ 1,247      $ 1,500      $ 1,547  

Add: noncontrolling interests

     29        29       61        38        44  

Add: interest expense - net

     90        79       161        190        161  

Add: net pension and OPEB cost (benefit), excluding service cost**

     4        (13     —          —          —    

Add: income taxes

     306        306       1,026        551        612  

Add: depreciation and amortization

     622        579       1,184        1,122        1,106  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

EBITDA (unaudited)

   $ 1,993      $ 1,775     $ 3,679      $ 3,401      $ 3,470  

Add: Transaction costs and other charges

     43        21       54        100        172  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted EBITDA (unaudited)

   $ 2,036      $ 1,796     $ 3,733      $ 3,501      $ 3,642  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

*

Taken from Praxair’s audited consolidated financial statements as of and for the years ended December 31, 2017, 2016 and 2015.

**

Unaudited. In accordance with Accounting Standards Codification Update 2017-6 “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, Net pension and OPEB cost (benefit), excluding service cost is no longer accounted for as part of operating profit but has to be disclosed as separate item as from January 1, 2018. For the years ended December 31, 2017, 2016 and 2015 these costs were included in the calculation of operating profit.



 

9


Section B — Issuer
   

Developments Since June 30, 2018

 

On July 5, 2018, Praxair, Inc. signed a sale and purchase agreement to sell the majority of its businesses in Europe to Taiyo Nippon Sanso Corporation, an affiliate of Mitsubishi Chemical Holdings Corporation (the “Praxair Europe SPA”). The Praxair Europe SPA was entered into as part of the commitments in connection with the merger control review of the Business Combination by the European Commission. The assets to be sold include Praxair’s industrial gases businesses in Belgium, Denmark, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom with approximately 2,500 employees. The businesses generated annual sales of approximately €1.3 billion in 2017. The purchase price for this transaction is €5.0 billion in cash consideration and is subject to customary adjustments at closing. Under the Praxair Europe SPA, Linde plc has given an independent guarantee as of the completion of the Business Combination for the full, due and timely performance and observance of all obligations of Praxair, Inc. and its local subsidiaries holding shares in the companies operating the businesses to be sold. The Praxair Europe SPA is conditioned on the successful consummation of the Business Combination and other regulatory approvals.

   

Following the closing of the Praxair Europe SPA and the closing of another agreement dated December 5, 2017 (the “SIAD SPA”) under which Praxair, inter alia, agreed to sell its participation in its Italian joint venture Società Italiana Acetilene e Derivati S.p.A. (“SIAD”) to its joint venture partner Flow Fin S.p.A. (“Flow Fin”) in exchange for Flow Fin’s participation in another Italian joint venture, Rivoira S.p.A., and a net purchase price of approximately €90 million payable by Praxair to Flow Fin, subject to, inter alia, the successful consummation of the Business Combination, Praxair will have minor remaining operations in Europe which will be outside of the industrial gases business and mainly related to coatings.

 

In the course of the merger control proceedings in the United States, Linde plc, Praxair, Inc. and Linde AG entered into the Consent Agreement, as described above.

   

Six Months Ended June 30, 2018 and 2017

 

In the six months ended June 30, 2018, Praxair’s sales were $6,060 million, 9% above the prior-year period driven by higher volumes in North America and Asia, including new project start-ups. Reported operating profit for the six months ended June 30, 2018 of $1,342 million, 22% of sales, was 14% above $1,173 million in the prior-year period. Operating profit included transaction costs of $43 million related to the intended Business Combination with The Linde Group. Excluding these costs, adjusted operating profit was $1,385 million, 23% of sales and 16% above the 2017 period driven by higher volumes and price. Diluted earnings per share (“EPS”) was $3.24, 17% above reported EPS of $2.76 in the six months ended June 30, 2017.

   

Fiscal Years 2017 and 2016

 

Praxair delivered solid results for the full year of 2017 with growth across all end-markets. Sales growth was largely driven by higher volumes and positive price. Improved macro economic conditions and new project start-ups contributed to growth in North America, Europe and Asia while South America volumes remained stable. Operating cash flow was 10% higher than 2016, largely driven by higher net income.



 

10


Section B — Issuer
   

•   Sales of $11,437 million were 9% above 2016 sales of $10,534 million. Excluding favorable currency impacts and higher cost pass-through, sales were 6% above the prior year due to volume growth in North America, Europe and Asia, including new project start-ups and higher price.

 

•   Reported operating profit of $2,448 million was 9% above 2016. Benefits from higher volumes and price were partially offset by cost inflation.

 

•   Reported net income – Praxair, Inc. of $1,247 million and diluted EPS of $4.32 decreased from $1,500 million and $5.21, respectively in 2016.

 

•   Cash flow from operations was a strong $3,041 million, 27% of sales. Capital expenditures were $1,311 million; dividends paid were $901 million; and net debt repayments were $771 million.

   

Fiscal Years 2016 and 2015

 

Praxair delivered solid results for the full year of 2016 despite continued challenging global macro-economic trends and foreign currency headwinds. Volume growth from food and beverage and healthcare end-markets and new project start-ups largely in Asia, Europe and South America was offset by weaker volumes in North and South America, primarily manufacturing and up-stream energy end-markets. Excluding foreign currency headwinds, sales growth came from higher overall pricing and acquisitions. Operating cash flow was 3% higher than 2015 despite lower net income from currency and base volume headwinds.

   

•   Sales of $10,534 million were 2% below 2015 sales of $10,776 million. Excluding negative currency impacts which reduced sales by 3%, and lower cost pass-through, sales were 2% above the prior year due to growth from positive price, new project start-ups and acquisitions. These increases were partially offset by lower base volumes primarily in North America due to weaker upstream energy and manufacturing end-markets.

 

•   Reported operating profit of $2,238 million was 4% below 2015. Benefits from project start-ups, acquisitions net of divestitures, higher price, and cost reduction programs were more than offset by the impact of lower base volumes.

 

•   Reported net income — Praxair, Inc. of $1,500 million and diluted earnings per share of $5.21 decreased from $1,547 million and $5.35, respectively, in 2015.

 

•   Cash flow from operations was a strong $2,773 million, 26% of sales. Capital expenditures were $1,465 million and acquisitions, net of cash acquired were $363 million primarily for investments in growth and density; dividends paid were $856 million; and net common stock purchases were $89 million.



 

11


Section B — Issuer
   

The Linde Group

 

The following tables set forth selected historical consolidated financial information for The Linde Group as of the end of and for the periods indicated, presented in accordance with IFRS as adopted by the EU. This, if presented as “audited”, is taken from the audited consolidated financial statements of The Linde Group and, if presented as “unaudited”, is either (i) derived from the audited consolidated financial statements of The Linde Group, or (ii) taken or derived from the unaudited consolidated financial statements, the accounting records or management reporting of The Linde Group. Historical operating results are not necessarily indicative of the results of operations for any future period. Please note the historical consolidated financial information contained in The Linde Group’s consolidated financial statements as of and for the financial year ended December 31, 2015 presented the Gist business (Gist logistics) as part of The Linde Group’s continuing operations. The Gist business (Gist logistics) was reported as non-current assets held for sale and was presented as discontinued operation (IFRS 5) in The Linde Group’s consolidated financial statements as of and for the financial years ended December 31, 2017 and 2016. To improve comparability, the historical consolidated financial information as of and for the financial year ended December 31, 2015 presented below is based on the adjusted comparable figure contained in the audited consolidated financial statements of The Linde Group for the financial year ended December 31, 2016 (i.e., presenting the Gist business (Gist logistics) as discontinued operation). The unaudited interim condensed consolidated financial statements as of and for the six months ended June 30, 2018 present the Gist business (Gist logistics) as part of continuing operations. In the second quarter of the financial year 2018, negotiations with potential buyers of the Gist business (Gist logistics) were abandoned and a sale of the Gist business (Gist logistics) was no longer deemed highly probable. To improve comparability, the historical consolidated financial information as of and for the six months ended June 30, 2017 presented below is based on the adjusted comparable figures contained in the unaudited interim condensed consolidated financial statements of The Linde Group as of and for the six months ended June 30, 2018 (i.e., presenting the Gist business (Gist logistics) as part of The Linde Group’s continuing operations in the segment Other Activities).



 

12


Section B — Issuer

 

Selected Statement of Profit or Loss Data  
     Six Months
Ended June 30,
                     

in € million (except where indicated otherwise)

   2018      2017      2017      2016     2015  
     (unaudited)      (audited)  

Revenue

     8,640        8,935        17,113        16,948       17,345  

Cost of sales

     5,536        5,889        11,274        10,847       11,166  

Gross profit

     3,104        3,046        5,839        6,101       6,179  

Marketing and selling expenses

     1,144        1,328        2,375        2,387       2,546  

Impairment losses on receivables and contract assets

     86        —          —          —         —    

Research and development costs

     52        53        112        121       131  

Administration expenses

     773        830        1,629        1,720       1,653  

Other operating income

     250        281        418        467       419  

Other operating expenses

     86        115        216        278       251  

Share of profit or loss from associates and joint ventures (at equity)

     9        8        19        13       12  

Net profit on operating activities — continuing operations

     1,222        1,009        1,944        2,075       2,029  

Financial income

     29        23        37        29       42  

Financial expenses

     126        167        302        353       439  

Profit before tax — continuing operations

     1,125        865        1,679        1,751       1,632  

Income tax expense

     242        206        143        424       396  

Profit for the period from continuing operations

     883        659        1,536        1,327       1,236  

Profit for the period from discontinued operations

     —          —          30        (52     16  

Profit for the period

     883        659        1,566        1,275       1,252  

Earnings per share in € — continuing operations — undiluted

     4.37        3.19        7.56        6.50       6.10  

Earnings per share in € — continuing operations — diluted

     4.37        3.19        7.56        6.48       6.09  

Earnings/(losses) per share in € — discontinued operations —undiluted

     —          —          0.16        (0.28     0.09  

Earnings/(losses) per share in € — discontinued operations —diluted

     —          —          0.16        (0.28     0.09  

Earnings per share in € — undiluted

     4.37        3.19        7.72        6.22       6.19  

Earnings per share in € — diluted

     4.37        3.19        7.72        6.20       6.18  

 

Other Information and Ratios

 

in € million (except where indicated

otherwise)                                           

   June 30,
2018
     December 31,
2017
     December 31,
2016
     December 31,
2015
 
     (unaudited)      (audited)  

Total assets

     32,514        33,513        35,189        35,347  

Total liabilities

     17,842        18,454        19,709        19,898  

Total equity

     14,672        15,059        15,480        15,449  

Capital subscribed

     475        475        475        475  

Number of shares outstanding (in thousands)

     185,638        185,638        185,638        185,638  

 

     Six Months Ended
June 30,
                   
     2018     2017     2017     2016     2015  
     (unaudited)     (audited)  

Cash flow from operating activities — continuing operations

     1,275       1,324       3,478       3,400       3,583  

Cash flow from operating activities — discontinued operations

     —         —         30       40       10  

Cash flow from operating activities

     1,275       1,324       3,508       3,440       3,593  

Cash flow from investing activities — continuing operations

     (83     (867     (1,818     (1,472     (1,780

Cash flow from investing activities — discontinued operations

     —         —         (28     (19     (15

Cash flow from investing activities

     (83     (867     (1,846     (1,491     (1,795

Cash flow from financing activities — continuing operations

     (1,344     (395     (1,621     (1,896     (1,523

Cash flow from financing activities — discontinued operations

     —         —         (2     (21     4  

Cash flow from financing activities

     (1,344     (395     (1,623     (1,917     (1,519

Capital expenditure(1) — continuing operations (excluding investments in financial assets)

     778       699       1,687       1,712       1,916  

Capital expenditure(2) — continuing operations

     859       753       1,766       2,004       2,036  

Weighted average number of shares outstanding (in thousands) — undiluted

     185,638       185,638       185,638       185,636       185,638  

Weighted average number of shares outstanding (in thousands) — diluted

     185,638       185,638       185,638       185,996       186,055  

Dividends per share in €—

     —         —         7.00       3.70       3.45  

Segment group operating profit(3) — continuing operations

     2,210       2,136       4,213       4,098       4,087  

Return on capital employed in %(4) — continuing operations

     9.5       n/a       8.7       8.9       8.7  

Return on capital employed (before special items) in %(4) — continuing operations

     10.8       n/a       10.2       9.4       9.5  

Order intake (Engineering Division)(5)

     1,878       1,170       2,390       2,257       2,494  

Order backlog (Engineering Division)(6)

     4,676       4,223       4,178       4,386       4,541  

 

(1)

Capital expenditure (excluding investments in financial assets) is derived from the corresponding line item within The Linde Group’s segment information not taking into account the amount of discontinued operations. The difference between capital expenditure (excluding investments in financial assets) and “Payments for tangible and intangible assets and plants held under finance leases in accordance with IFRIC 4/ IAS 17” in The Linde Group’s cash flow statement mainly relates to timing differences between the dates of asset capitalization and cash payments.



 

13


Section B — Issuer

 

(2)

Capital expenditure (continuing operations) includes investments in financial assets.

(3)

Group operating profit is a non-IFRS performance indicator used by The Linde Group and is defined as EBIT (before special items) adjusted for amortization of intangible assets and depreciation of tangible assets. The following table presents the reconciliation from The Linde Group’s profit for the period (as presented in The Linde Group’s statement of profit or loss) to The Linde Group’s Segment group operating profit from continuing operations for the periods presented:

 

     Six Months
Ended

June 30,
                   

In € million

   2018     2017     2017     2016     2015  
     (unaudited)     (audited, unless
otherwise indicated)
 

Profit for the period from continuing operations

     883       659       1,536       1,327       1,236  

Income tax expense

     242       206       143       424       396  

Net financial result

     (97     (144     (265     (324     (397

Net profit on operating activities from continuing operations

     1,222       1,009       1,944       2,075       2,029  

Amortization of intangible assets/Depreciation of tangible assets

     916       966       1,896       1,897       1,866  

Special items

     72       161       373       126       192  

Thereof restructuring expenses

     0       114       280     106     162

Thereof impairment of assets and other structural and consulting costs

     0       20       —       10     30

Thereof merger costs

     72       27       93     10     —  

Segment group operating profit from continuing operations

     2,210       2,136       4,213       4,098       4,087  

Thereof EMEA

     968       924       1,874       1,807       1,790  

Thereof Asia/Pacific

     600       615       1,202       1,084       1,063  

Thereof Americas

     616       627       1,192       1,319       1,298  

Thereof Engineering Division

     137       97       220       196       216  

Thereof Other Activities

     15       13       —       —       —  

Thereof elimination and other items(a)

     (126     (140     (275     (308     (280

 

*

Unaudited.

(a)

Elimination and other items include consolidation effects and corporate activities.

 

(4)

The following table presents the components of return on capital employed for The Linde Group:

 

     Six Months Ended
June 30,
               

in € million

   2018      2017      2017      2016      2015  
     (unaudited)      (audited)  

Net profit on operating activities from continuing operations

     1,222        1,009        1,944        2,075        2,029  

Special items

     72        161        373        126        192  

Return before special items

     1,294        1,170        2,317        2,201        2,221  


 

14


Section B — Issuer  
     As of June 30,      As of December 31,  
     2018      2017      2017      2016(a)      2015  
     (unaudited)      (audited, unless otherwise
indicated)
 

Equity including non-controlling interests — continuing operations(b)

     14,672        14,568        14,609        15,034        14,857

Plus: Financial debt

     8,094        n/a        8,019        8,528        9,476

Plus: Liabilities from finance leases

     66        n/a        54        74        78

Less: Receivables from finance leases

     86        n/a        103        214        269

Less: Cash, cash equivalents and securities

     1,289        n/a        2,055        1,594        1,837

Plus: Net pension obligations

     1,100        n/a        1,141        1,449        951

Capital employed — continuing operations

     22,557        n/a        21,665        23,277        23,256

Plus: Special items (after taxes)

     54        n/a        275        95        139  

Capital employed — continuing operations (before special items) (b)

     22,611        n/a        21,940        23,372        23,992  

Return on capital employed from continuing operations in %(c)

     9.5        n/a        8.7        8.9        8.7  

Return on capital employed from continuing operations (before special items) in%(c)

     10.8        n/a        10.2        9.4        9.5  

 

*

Unaudited.

(a)

Based on the adjusted comparable figures contained in the audited consolidated financial statements of The Linde Group for the financial year 2017.

(b)

For the purposes of calculating the capital employed from continuing operations, the equity of The Linde Group was adjusted by the equity of the Gist business (Gist logistics) in the financial years 2017, 2016 and 2015. The figure as of June 30, 2017 is based on the adjusted comparable figure contained in the unaudited interim condensed consolidated financial statements of The Linde Group as of and for the six months ended June 30, 2018.

(c)

Return on capital employed is calculated as return of the current year divided by the average of the capital employed as of December 31 of the current year and December 31 of the prior year. For the twelve months ended June 30, 2018, return on capital employed is calculated as return of the last twelve months divided by the average capital employed as of June 30, 2018 (€22,643 million and €22,729 million before special items).

 

(5)

Order intake (Engineering Division) is defined as the value of customer orders received during the reporting period.

(6)

Order backlog (Engineering Division) is defined as the sum of values of order intakes from previous periods plus the values of order intakes from the reporting period, less value of sales realized as well as contract changes occurring until the reporting date.

 

   

Developments Since June 30, 2018

 

On July 16, 2018, Linde AG, among others, entered into an agreement, which was amended on September 22, 2018 and October 19, 2018, with a consortium comprising companies of the German industrial gases manufacturer Messer Group and CVC Capital Partners Fund VII to sell the majority of The Linde Group’s industrial gases business in North America and certain industrial gases business activities in South America (the agreement as amended, the “Americas SPA”). In 2017, the businesses of The Linde Group to be sold generated annual sales of €1.5 billion and EBITDA of €350 million. The purchase price of €3.0 billion is subject to fixed deductions for certain items relating to liabilities of the sold businesses and customary adjustments for cash, financial debt, and working capital at closing. Under the Americas SPA, Linde plc has given an independent guarantee to MG Industries GmbH, a purchaser entity that is part of the Messer Group, as of the completion of the Business Combination for the full, due and timely performance of any obligation of Linde AG and Praxair, Inc. under the Americas SPA. The Americas SPA contains representations, warranties and covenants (including sufficiency of assets in light of the carve-out) that can be considered customary for a transaction of this nature. Closing of the Americas SPA is subject to the completion of the Business Combination and certain regulatory approvals. In the course of the merger control proceedings in the United States, Linde plc, Praxair, Inc. and Linde AG also entered into the Consent Agreement, as described above.



 

15


Section B — Issuer
   

Six Months Ended June 30, 2018 and 2017

 

The revenue of The Linde Group fell in the first half of 2018 by 3.3%, or €295 million, to €8,640 million, when compared with the figure for the first half of 2017, which was €8,935 million. Exchange rate effects were the main reason for this decrease. In addition, the first-time application of the new accounting standard IFRS 15 (Revenue from Contracts with Customers) with effect from January 1, 2018 had a negative impact on revenue. Costs which had previously been disclosed gross are now required to be shown net of sales-related costs reimbursed by the customer, which has led to a reduction in revenue and a reduction of an equal amount in cost of sales. After adjusting for exchange rate effects arising solely on the translation of local currencies into the Euro and for the impact of the first-time application of IFRS 15, revenue of The Linde Group in the first half of 2018 was 4.7% above the figure for the first half of 2017.

 

Cost of sales in the six months ended June 30, 2018 fell by €353 million, or 6.0%, to €5,536 million (six months ended June 30, 2017: €5,889 million). This decrease was not only due to exchange rate effects but also to the first-time application of new accounting standard IFRS 15.

 

Marketing and selling expenses in the six months ended June 30, 2018 decreased by €184 million, or 13.9%, to €1,144 million (six months ended June 30, 2017: €1,328 million). This decrease was partly related to the new requirement according to IFRS 9 in conjunction with IAS 1 to present impairment losses as a separate line item within the statement of profit or loss. The prior year figure of marketing and selling costs has not been adjusted. Impairment losses on receivables and contract assets were €86 million in the six months ended June 30, 2018 (six months ended June 30, 2017: not recorded). Additionally, exchange rate effects of around €68 million led to a decrease in costs. Restructuring and merger costs recognized in marketing and selling costs also decreased to €1 million in the six months ended June 30, 2018 (six months ended June 30, 2017: €38 million).

 

Net profit on operating activities increased for the six months ended June 30, 2018 by 21.1%, or €213 million, to €1,222 million (six months ended June 30, 2017: €1,009 million), mainly due to a decrease in special items of €89 million to €72 million in the six months ended June 30, 2018 (six months ended June 30 2017: €161 million).

   

Fiscal Year 2017 and 2016

 

In 2017, the revenue of The Linde Group came to €17,113 million, a 1.0%, or €165 million, increase compared to the prior year (2016: €16,948 million). The increase was mainly driven by the continued positive development in the EMEA and Asia/Pacific segments, as well as the higher contribution to revenue by the Linde Engineering Division. As counter effects, revenue was negatively affected by decreased revenue in the Americas segment and by negative exchange rate effects, in particular the exchange rates of certain currencies (the U.S. dollar, the British pound and the Chinese renminbi) to the euro. Without these exchange rate effects, The Linde Group’s revenue in 2017 would have been 2.1% higher than in 2016.



 

16


Section B — Issuer

 

   

The cost of sales increased by 3.9%, or €427 million, to €11,274 million in 2017 (2016: €10,847 million) and therefore increased at a faster rate than revenue. This was due not only to higher restructuring costs recognized in costs of sales which increased to €81 million in 2017 (2016: €27 million), but also to higher natural gas prices and energy costs than in the previous year. Exchange rate effects of around €90 million in 2017, on the other hand, helped to mitigate cost increases.

 

Marketing and selling expenses decreased by €12 million, or 0.5%, to €2,375 million in 2017 (2016: €2,387 million). This decrease was driven by exchange rate effects of around €77 million. In contrast, external freight costs increased by €28 million. Restructuring costs recognized in marketing and selling costs also increased to €57 million in 2017 (2016: €8 million).

 

Net profit on operating activities from continuing operations in 2017 came to €1,944 million, which was 6.3%, or €131 million, lower than the amount for the previous year of €2,075 million. This includes higher restructuring costs of €280 million (2016: €116 million) incurred during 2017, related to the group-wide efficiency program LIFT (“LIFT”) launched in 2016, which are recognized in the various cost items above.

   

Fiscal Years 2016 and 2015

 

In 2016, the revenue of The Linde Group came to €16,948 million, a 2.3%, or €397 million, decrease compared to the prior year (2015: €17,345 million). This development was mainly driven by negative exchange rate effects, in particular the exchange rates of certain currencies (the British pound, the Chinese renminbi and the South African rand) to the euro. Without these exchange rate effects, The Linde Group’s revenue would have been 0.2% higher than in 2015. In addition, the Linde Engineering Division contributed less to revenue in 2016 than in 2015.

 

The cost of sales decreased by 2.9%, or €319 million, to €10,847 million for 2016 (2015: €11,166 million) and therefore decreased at a faster rate than revenue. This is mainly due to the fact that the Linde Engineering Division reported lower revenue than in the previous year. Margins in the Linde Engineering Division are lower than in the Linde Gases Division. Therefore, a lower contribution to revenue in the Linde Engineering Division has a stronger impact on cost of sales. In addition, efficiency gains driven by lower personnel costs due to The Linde Group’s efficiency programs also contributed to the decrease in cost of sales in 2016. Moreover, restructuring costs recognized in costs of sales decreased to €27 million in 2016 (2015: €35 million).



 

17


Section B — Issuer

 

   

Marketing and selling expenses decreased by €159 million, or 6.2%, to €2,387 million for 2016 (2015: €2,546 million). This decrease mainly related to lower energy costs for distribution and freight as well as lower personnel expenses (largely due to personnel reductions relating to The Linde Group’s efficiency programs). Also, restructuring costs recognized in marketing and selling costs decreased to €8 million in 2016 (2015: €46 million).

 

Net profit on operating activities from continuing operations in 2016 came to €2,075 million, which was 2.3%, or €46 million, higher than the amount for the previous year of €2,029 million. This includes reduced restructuring costs of €116 million (2015: €192 million) incurred during 2016, related to LIFT, which are recognized in the various cost items above.

B.8   Selected key pro forma financial information.  

The following unaudited pro forma condensed combined financial information (“Pro Forma Financial Information”) is presented to illustrate the estimated effects of the proposed Business Combination, including certain adjustments as described in the Notes to the Pro Forma Financial Information.

 

The Pro Forma Financial Information has been prepared for illustrative purposes only and, by its nature addresses a hypothetical situation and, therefore, does not represent the Combined Group’s actual financial position or results as of the dates indicated or what financial position or results would be for any future periods.

 

The Pro Forma Financial Information is based on Praxair’s and The Linde Group’s historical consolidated financial statements which are adjusted to give pro forma effect to the Business Combination with Praxair representing the accounting acquirer. The pro forma effects relate to events that are (i) directly attributable to the Business Combination, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statement of income, expected to have a continuing impact on the Combined Group’s results. Acquisition accounting is dependent upon certain valuations and other studies that have yet to progress to a stage where there is sufficient information for a definitive measurement. Furthermore, the process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of judgment in determining the appropriate assumptions and estimates. Accordingly, the Pro Forma Adjustments included herein are preliminary and have been presented solely for the purpose of providing the Pro Forma Financial Information as required by the EU Prospectus Regulation. The final determination of the purchase consideration and purchase accounting will be based on the fair values of the assets acquired and liabilities assumed from The Linde Group at the date of the completion of the Business Combination. Linde plc expects differences between preliminary estimates in the Pro Forma Financial Information and the final acquisition accounting which could have a material impact on the Pro Forma Financial Information and Linde plc’s future consolidated results of operations and financial condition.



 

18


Section B — Issuer

 

    The unaudited pro forma combined financial statement of income for the year ended December 31, 2017 gives effect to the Business Combination as if it had occurred on January 1, 2017. The unaudited pro forma combined balance sheet as of December 31, 2017 gives effect to the Business Combination as if it had occurred on December 31, 2017.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2017

 

(In Millions)

   Praxair
IFRS
(Notes
4(a), 6)
     The Linde
Group
(Notes
4(b), 7)
     Divestitures
– net
(Note 8)
    Purchase
Accounting
Adjustments
     Notes     Other     Notes     Pro Forma
Condensed
Combined
 

Assets

                   

Goodwill

   $ 3,233      $ 13,079      $ (690   $ 11,657        3     $ —         $ 27,279  

Other intangible assets

     803        2,510        (131     12,800        4 (f)      —           15,982  

Tangible assets

     11,807        14,248        (2,544     7,618        4 (d)      —           31,129  

Investments in associates and joint ventures

     727        263        (251     339        4 (e)      —           1,078  

Other financial assets

     131        101        —         —            —           232  

Receivables from finance leases

     5        84        —         —            —           89  

Trade receivables

     —          7        —         —            —           7  

Other receivables and other assets

     246        481        (111     —            —           616  

Income tax receivables

     —          14        —         —            —           14  

Deferred tax assets

     199        499        (36     —            —           662  
  

 

 

    

 

 

    

 

 

   

 

 

      

 

 

     

 

 

 

Total Non-Current Assets

     17,151        31,286        (3,763     32,414          —           77,088  

Inventories

     614        1,457        (252     209        4 (c)      —           2,028  

Receivables from finance leases

     1        40        —         —            —           41  

Trade receivables

     1,677        3,331        (547     —            —           4,461  

Other receivables and other assets

     318        838        (115     —            —           1,041  

Income tax receivables

     58        273        (18     —            —           313  

Securities

     —          748        —         —            —           748  

Cash and cash equivalents

     617        1,720        (56     —            8,020       4 (p)      10,301  

Assets classified as held for sale

     —          415        4,751       1,899        4 (o)      (6,650     4 (p)      415  
  

 

 

    

 

 

    

 

 

   

 

 

      

 

 

     

 

 

 

Total Current Assets

     3,285        8,822        3,763       2,108          1,370         19,348  
  

 

 

    

 

 

    

 

 

   

 

 

      

 

 

     

 

 

 

Total Assets

   $ 20,436      $ 40,108      $ —       $ 34,522        $ 1,370       $ 96,436  
  

 

 

    

 

 

    

 

 

   

 

 

      

 

 

     

 

 

 


 

19


Section B — Issuer

 

(In Millions)

   Praxair
IFRS
(Notes
4(a), 6)
    The Linde
Group
(Notes
4(b), 7)
    Divestitures
– net
(Note 8)
    Purchase
Accounting
Adjustments
    Notes     Other     Notes     Pro Forma
Condensed
Combined
 

Equity and liabilities

                

Capital subscribed

   $ —       $ 570     $ —       $ (570     4 (i)    $ —         $ —    

Capital reserve

     —         8,079       —         (8,079     4 (i)      —           —    

Capital subscribed and reserved

     4,175       —         —         40,593       4 (j)      (7,196     4 (n)      37,572  

Revenue reserves (Retained earnings)

     12,582       9,863       —         (9,863     4 (i)      (158     4 (l)      15,496  
               (11     4 (m)   
               3,083       4 (p)   

Treasury Stock, at cost

     (7,196     —         —         —           7,196       4 (n)      —    

Cumulative changes in equity not recognised through the statement of profit and loss

     (3,456     (1,510     —         1,510       4 (i)      —           (3,456

Total Equity Attributable to Shareholders

     6,105       17,002       —         23,591         2,914         49,612  

Non-controlling interests

     493       1,053       —         4,084       4 (k)      —           5,630  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total Equity

     6,598       18,055       —         27,675         2,914         55,242  

Provisions for pensions and similar obligations

     891       1,565       (90     —           14       4 (m)      2,380  

Other non-current provisions

     103       574       (53     —           —           624  

Deferred tax liabilities

     1,080       1,503       (300     5,902       4 (h)      —           8,185  

Financial liabilities

     7,884       7,301       (23     470       4 (g)      —           15,632  

Liabilities from finance leases

     3       48       (3     —           —           48  

Trade payables

     —         1       —         —           —           1  

Other non-current liabilities

     527       645       (57     —           —           1,115  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total Non-Current Liabilities

     10,488       11,637       (526     6,372         14         27,985  

Current provisions

     86       1,355       (35     —           —           1,406  

Financial liabilities

     1,058       2,264       —         —           —           3,322  

Short-term debt

     238       —         (7     —           —           231  

Liabilities from finance leases

     1       17       (2     —           —           16  

Trade payables

     972       3,351       (359     —           195       4 (l)      4,159  

Other current liabilities

     710       2,692       (269     —           —           3,133  

Income tax liabilities

     285       661       (40     —           (37     4 (l)      866  
               (3     4 (m)   

Liabilities in connection with assets classified as held for sale and disposal groups

     —         76       1,238       475       4 (o)      (1,713     4 (p)      76  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total Current Liabilities

     3,350       10,416       526       475         (1,558       13,209  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total Equity and Liabilities

   $ 20,436     $ 40,108     $ —       $ 34,522       $ 1,370       $ 96,436  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 


 

20


Section B — Issuer

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF PROFIT OR

LOSS FOR THE YEAR ENDED DECEMBER 31, 2017

 

(In Millions, except

per share data)        

   Praxair
IFRS
(Notes
5(a), 6)
    The Linde
Group
(Notes
5(b), 7)
    Divestitures
– net
(Note 8)
    Purchase
Accounting
Adjustments
    Notes     Other     Notes     Pro Forma
Condensed
Combined
 

Revenue

   $ 11,437     $ 19,976     $ (3,109   $ —         $ (100     5 (c)    $ 28,204  

Cost of sales

     7,494       14,184       (2,156     197       5 (d)      (100     5 (c)      21,007  
           1,388       5 (e)       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Gross Profit

     3,943       5,792       (953     (1,585       —           7,197  

Research and development costs

     99       127       (1     134       5 (f)      —           359  

Marketing and selling expenses

     582       1,851       (190     328       5 (f)      —           2,571  

Administration expenses

     816       1,851       (287     —           —           2,380  

Other operating income

     13       471       (84     —           —           400  

Other operating expenses

     9       251       (70     —           —           190  

Share of profit or (loss) from associates and joint ventures (at equity)

     47       21       (14     —           —           54  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net Profit on Operating Activities - Continuing Operations

     2,497       2,204       (503     (2,047       —           2,151  

Financial income

     40       42       (6     —           —           76  

Financial expenses

     249       341       (33     (97     5 (h)      —           460  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Profit Before Tax From Continuing Operations

     2,288       1,905       (476     (1,950       —           1,767  

Income tax expense

     955       157       (20     (592     5 (i)      —           500  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Profit From Continuing Operations (including noncontrolling interests)

     1,333       1,748       (456     (1,358       —           1,267  

Less: Noncontrolling interests

     (61     (149     18       (13     5 (g)      —           (205
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Profit From Continuing Operations

   $ 1,272     $ 1,599     $ (438   $ (1,371     $ —         $ 1,062  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Earnings Per Share - Continuing Operations

                

Earnings per share - undiluted

   $ 4.44     $ 8.61               $ 1.93  

Earnings per share - diluted

   $ 4.40     $ 8.61               $ 1.92  

Weighted Average Shares Outstanding (000’s)

                

Basic shares outstanding

     286,261       185,638               5 (j)      549,408  

Diluted shares outstanding

     289,114       185,638               5 (j)      552,547  


 

21


Section B — Issuer
 

Note 3:   Calculation of Purchase Consideration

 

Holders of Linde AG Shares (“Linde AG Shareholders”) that accepted the Exchange Offer will receive approximately 263.1 million Linde plc shares in exchange for their approximately 170.9 million tendered Linde AG Shares. Because Praxair is the accounting acquirer, the pro forma condensed combined financial statements reflect the estimated fair value of the equity to be issued, as represented by the market price of Praxair Shares. The total purchase consideration to be received by Linde AG Shareholders will be based on the fair value of the equity deemed to be issued at the completion of the Business Combination. The preliminary purchase price below ($40,593 million) reflects the estimated fair value of the 92% of Linde AG Shares tendered and Linde plc equity issued, which is based on the October 11, 2018 closing price of Praxair common shares of $154.26 per share. The amount of the total estimated purchase price below is not necessarily indicative of the actual fair value of the equity to be issued at the effective date of the Business Combination.

 

The preliminary estimated purchase price and estimated fair value of The Linde Group’s net assets acquired as if the Business Combination closed on December 31, 2017 is presented as follows:

 

(In thousands, except value per share data and Linde AG Shares exchange ratio)

      

Linde AG Shares tendered(i)

     170,875  

Linde AG Shares exchange ratio(ii)

     1.540  
  

 

 

 

Shares of Linde plc to be issued

     263,147  

Value per share of Praxair as of October 11, 2018(iii)

   $ 154.26  

Estimated purchase price (in millions)

   $ 40,593  

 

(i)

Number of Linde AG Shares tendered in the Exchange Offer.

(ii)

Exchange ratio for Linde AG Shares as set forth in the Offer Document.

(iii)

Closing price of Praxair Shares on the New York Stock Exchange on October 11, 2018.

 

 

Preliminary Purchase Accounting

 

Under the acquisition method of accounting, The Linde Group’s assets and liabilities will be recorded at fair value at the date of the completion of the Business Combination and combined with the historical carrying amounts of the assets and liabilities of Praxair. The Pro Forma Adjustments are preliminary and based on estimates of the fair value and useful lives of the assets as of December 31, 2017 and have been prepared by Praxair and The Linde Group management to illustrate the estimated effect of the Business Combination. With the exception of inventory, the Pro Forma Financial Information does not include any fair value adjustments associated with current assets and liabilities of The Linde Group, as Praxair and The Linde Group management have preliminarily concluded that these historical carrying values approximate their fair values as of December 31, 2017. The purchase accounting is dependent upon certain valuation and other studies that have not yet been completed. Accordingly, the preliminary purchase accounting is subject to further adjustments as additional information becomes available and as additional analysis and final valuations are conducted at and following the completion of the Business Combination. The final valuations could differ materially from the preliminary fair valuations presented below and, as such, no assurances can be provided regarding the preliminary purchase accounting.



 

22


Section B — Issuer
  The following table summarizes the allocation of estimated purchase price to the identifiable assets acquired and liabilities assumed by Praxair, with the excess of the purchase price over the fair value of The Linde Group’s net assets recorded as goodwill:

 

(In millions)

   The Linde
Group IFRS
     Fair Value
Adjustments

(Note 4)
     Footnote
Reference
    Fair Value  

Purchase Price (i)

           $ 40,593  
          

 

 

 

Identifiable net assets:

          

Inventories

   $ 1,457      $ 209        4 (c)      1,666  

Tangible assets

     14,248        7,618        4 (d)      21,866  

Investments in associates and joint ventures

     263        339        4 (e)      602  

Other intangible assets

     2,510        12,800        4 (f)      15,310  

All other assets (excluding goodwill)(ii)

     8,136        —            8,136  

Financial liabilities

     (7,301      (470      4 (g)      (7,771

Deferred tax liabilities

     (1,503      (5,902      4 (h)      (7,405

Assets classified as held for sale

     415        1,899        4 (o)      2,314  

Liabilities in connection with assets classified as held for sale and disposal groups

     (76      (475      4 (o)      (551

All other liabilities (ii)

     (13,173      —            (13,173
  

 

 

    

 

 

      

 

 

 

Total identifiable net assets

     4,976        16,018          20,994  

Non-controlling interests

     (1,053      (4,084      4 (k)      (5,137

Goodwill

     13,079        11,657          24,736  
  

 

 

    

 

 

      

 

 

 

Total

   $ 17,002      $ 23,591        $ 40,593  
  

 

 

    

 

 

      

 

 

 

 

(i)

See above for the calculation of the purchase price.

(ii)

Management has preliminarily determined the carrying values approximate fair value.

 

 

The goodwill balance is primarily attributed to the assembled workforce, expanded market opportunities and cost and other operating synergies anticipated upon the integration of the operations of Praxair and The Linde Group. See Note 4 for a discussion of the methods used to determine the fair value of The Linde Group’s identifiable assets and liabilities.

 

Note 4:   Notes to Unaudited Pro Forma Condensed Combined Balance Sheet

 

(a)   Represents the historical statement of financial position of Praxair as of December 31, 2017 as adjusted and reclassified to conform to IFRS (see Note 6).

 

(b)   Represents the audited historical group consolidated balance sheet of The Linde Group as of December 31, 2017 translated from euros to U.S. dollars, the reporting currency of the Combined Group, using the exchange rates derived from Bloomberg ($1.2005 per €1.0000 as of December 31, 2017) (see Note 7).

 

(c)   Represents the adjustment of $209 million to the historical inventory of The Linde Group based on the estimated fair value of the inventory (see Note 5(d)).

 

(d)   Represents the net adjustment of $7,618 million to The Linde Group’s historical tangible assets, primarily production plants, based on the preliminary analysis of the estimated fair value of the tangible assets (see Note 5(e)). The fair value of tangible assets was calculated using replacement costs adjusted for the age of the asset and is summarized below:

 

Tangible Assets

   Amount (in millions
of dollars)
     Estimated Weighted
Average Useful Life
(in years)*
 

Production plants

   $ 12,603        9  

Storage tanks

     1,784        10  

Transportation equipment and other

     1,275        6  

Cylinders

     2,326        11  

Buildings

     2,190        18  

Land and improvements

     654        Indefinite  

Construction in progress

     1,034     
  

 

 

    

Estimated fair value of tangible assets

     21,866     

Less: Pre-existing tangible assets of The Linde Group

     14,248     
  

 

 

    

Net adjustment to tangible assets

   $ 7,618     
  

 

 

    

 

*

Represents the future estimated remaining useful life which was estimated based upon the useful life of each asset class adjusted for age.



 

23


    Section B — Issuer
 

(e)   Represents the adjustment of $339 million to The Linde Group’s historical investments in associates and joint ventures based on the estimated fair value.

 

(f)   Represents the net adjustment of $12,800 million to The Linde Group’s other intangible assets based on preliminary analysis of the estimated fair value of the other intangible assets. The net adjustment to other intangible assets is calculated as follows:

 

     Estimated Useful
Life (in years)
     Amount (in millions
of dollars)
 

Other intangible assets

     

Customer relationships

     20      $ 11,712  

Tradenames

     3 to Indefinite        2,433  

Acquired technology & other intangibles

     various        1,165  
     

 

 

 

Estimated fair value of other intangible assets

        15,310  

Less: Pre-existing other intangible assets of The Linde Group

        2,510  
     

 

 

 

Net adjustment to other intangible assets

      $ 12,800  
     

 

 

 

 

 

The fair value estimate for all other identifiable intangible assets is based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). This preliminary fair value estimate could include assets that are not intended to be used, may be sold or are intended to be used in a manner other than their best use. The final fair value determination for identifiable intangibles or estimates of remaining useful lives may differ materially from this preliminary determination (see Note 5(f)).

 

The fair value of the customer relationships intangible asset was valued using a multi-period excess earnings method, a form of the income approach, which incorporates the estimated future cash flows to be generated from The Linde Group’s existing customer base. Excess earnings are the earnings remaining after deducting the market rates of return on the estimated values of contributory assets, including debt-free net working capital, tangible assets, and other identifiable intangible assets. The excess earnings are thereby calculated for each year of multi-year projection periods and discounted to present value.

 

Tradenames, primarily the Linde name, and acquired technology were valued using the relief from royalty method under the income approach, this method estimates the cost savings generated by a company related to the ownership of an asset for which it would otherwise have had to pay royalties or license fees on revenues earned through the use of the asset and discounted to present value.

 

(g)   Represents the adjustment of $470 million to The Linde Group’s historical long-term debt to record it at fair market value as of the balance sheet date. The fair value for long-term debt was primarily obtained from third party quotes as the majority of the bond portfolio of The Linde Group is publicly traded (see Note 5(h)). In addition, The Linde Group has certain debt instruments that include change in control provisions. For more information relating to these provisions, please refer to Note 4(m) below.

 

(h)   Represents the adjustment of $5,902 million to deferred tax liabilities resulting from the pro forma fair value adjustments for intangible assets (excluding goodwill as it is not expected to be tax deductible), property, plant and equipment, equity investments, inventory and debt utilizing a 25% effective tax rate. This effective tax rate is based on the statutory tax rates in the jurisdictions where the fair value adjustments have been made.

 

(i) Represents adjustments to eliminate The Linde Group’s historical equity amounts.



 

24


Section B — Issuer
 

(j) Represents adjustments of $40,593 million to record the fair value of equity consideration in Linde plc Shares transferred to Linde AG Shareholders to effectuate the Business Combination (see Note 3).

 

(k)   Represents an adjustment of $4,084 million to record noncontrolling interests of Linde AG to fair value. This includes an adjustment of approximately $3.3 billion for the 8% of Linde AG Shares which were not tendered in the Exchange Offer and are intended to be the subject of a cash-merger squeeze-out. This intention was announced on April 25, 2018. On October 15, 2018, Linde AG published an ad hoc announcement stating that the amount of the adequate cash compensation was anticipated to be €188.24 per Linde AG Share. This figure has been used as the basis for this adjustment. Such amount has been confirmed in the preliminary assessment of the court-appointed auditor. The final determination of the cash compensation by Linde Intermediate Holding AG will occur after the finalization of the valuation and auditing activities. Accordingly, the actual compensation to be paid may differ. The remaining adjustment of approximately $0.7 billion relates to the fair value adjustment for historic noncontrolling interests of The Linde Group.

 

(l) Represents an estimate of the future costs of $195 million, comprised of $122 million to be incurred by The Linde Group and $74 million to be incurred by Praxair, and related tax effect of $37 million, directly attributable to the Business Combination, including primarily advisory, consulting, marketing and legal fees that are recorded as an adjustment to the unaudited pro forma condensed combined balance sheet only. These amounts will be expensed as incurred in the future.

 

(m) Represents an adjustment to certain historic Praxair non-qualified benefit plans which employees have elected to receive a lump sum payout upon a change in control as defined by the specific plans. This change in control provision will be settled as a result of the Merger and will result in a cash payout of approximately $120 million, $106 million of which was previously accrued by Praxair as of December 31, 2017.

 

Praxair and The Linde Group are parties to agreements that contain change-of-control provisions that may be triggered upon completion of the Business Combination. Upon the triggering of these change-of-control provisions, the counterparties to the agreement may be able to exercise certain rights that have a negative effect on Praxair, The Linde Group or, after the Business Combination, Linde plc. These change-of-control provisions exist in certain agreements, including debt obligations.

 

With regard to debt obligations, the terms of most of The Linde Group’s notes with a nominal value of approximately €7.1 billion outstanding as of December 31, 2017 (approximately €6.7 billion as of June 30, 2018) include change-of-control rights which are triggered by a change of control of Linde AG if such change of control were to result in a below investment grade ratings downgrade of Linde AG’s senior unsecured credit rating by Moody’s Investors Services or Standard & Poor’s Rating Services. Linde plc intends to manage its affairs so that it will hold a strong credit rating following the completion of the Business Combination.

 

(n)   Represents an adjustment to retire existing Praxair treasury stock which, in accordance with the terms of the Business Combination, will not be converted to Linde plc Shares upon completion of the Business Combination.

 

(o)   Represents the fair value adjustments of $1,899 million and $475 million related to assets and tax liabilities, respectively, expected to be divested by The Linde Group as a result of the antitrust process.



 

25


Section B — Issuer
 

(p)   Represents the consummation of the divestitures required as part of the Business Combination. Net cash proceeds of $8.0 billion includes $5.5 billion related to Praxair’s divestiture of its European business ($6.0 billion less $0.5 billion of estimated taxes) and $2.6 billion related primarily to the sale of the majority of The Linde Group’s industrial gases business in North America and certain business activities in South America ($3.1 billion less $475 million of estimated taxes). Tax obligations relating to the sale of The Linde Group’s businesses of approximately $475 million were established as part of purchase accounting. In addition, this amount includes a cash outflow of $0.1 billion in connection with the SIAD SPA related to Praxair’s Italian joint ventures. See Note 8 for further information. Furthermore, a reduction of net assets of $5.0 billion ($6.7 billion of assets classified as held for sale less $1.7 billion of liabilities in connection with assets classified as held for sale and disposal groups) was recorded to reflect the consummation of these divestitures (including effects of purchase accounting adjustments). Actual cash received and taxes paid could vary materially depending upon the facts and circumstances that exist at the time of divestiture.

 

Note 5:   Notes to Unaudited Pro Forma Condensed Combined Statement of Profit or Loss

 

(a)   Represents the historical statement of profit and loss for Praxair, Inc. for the year ended December 31, 2017, as adjusted and reclassified to conform to IFRS (see Note 6).

 

(b)   Represents the historical group consolidated statement of income for The Linde Group for the year ended December 31, 2017, translated from euros to U.S. dollars, the reporting currency of the Combined Group, using the exchange rates derived from Bloomberg ($1.1299 per €1.0000 for the year ended December 31, 2017) and adjusted to exclude the impacts of discontinued operations (see Note 7).

 

(c)   Represents the elimination of $49 million of sales from Praxair to The Linde Group and $51 million of sales from The Linde Group to Praxair, and corresponding related cost of sales ($100 million), for the year ended December 31, 2017.

 

(d)   Represents an adjustment of $197 million to cost of sales for the estimated incremental expense related to the inventory fair value adjustment which is recorded as inventory is sold (see Note 4(c)).

 

(e)   Represents an adjustment to cost of sales to record the estimated additional depreciation expense related to the increased value of tangible assets, which have been recorded at estimated fair value on a pro forma basis (see Note 4(d)). These pro forma fair value amounts will be depreciated over the estimated remaining useful lives on a straight-line basis consistent with Praxair’s useful life assumptions. The net adjustment to depreciation expense is calculated as follows:

 

(In millions)

   Estimated Fair
Value (Note 4)
     Year Ended
December 31, 2017
 

Depreciation of acquired property, plant and equipment

   $ 21,866      $ 3,232  

Less: The Linde Group’s historical depreciation expense*

        1,844  
     

 

 

 

Net adjustment to depreciation expense (cost of sales)

      $ 1,388  
     

 

 

 

 

*

Derived from The Linde Group’s historical consolidated financial statements for the year ended December 31, 2017 translated from euros to U.S. dollars, the reporting currency of the Combined Group, using the exchange rates derived from Bloomberg (average exchange rate of $1.1299 per €1.0000 for the year ended December 31, 2017).



 

26


 

(f)   Represents the adjustments to record amortization expense related to the increased basis of intangible assets (see Note 4(f)), which have been recorded at estimated fair value on a pro forma basis and will be amortized over the estimated useful lives on a pattern of economic benefit. The net adjustment to amortization expense is calculated as follows:

 

(In millions)

   Estimated
Fair Value
(Note 4)
     Year Ended
December 31, 2017
 

Amortization of acquired finite-lived intangible assets

   $ 15,310      $ 760  

Less: The Linde Group’s historical amortization expense*

        298  
     

 

 

 

Net adjustment to amortization expense

      $ 462  
     

 

 

 

Net adjustment to amortization expense reflected in:

     

Research and development costs

      $ 134  

Marketing and selling expenses

        328  
     

 

 

 

Total

      $ 462  
     

 

 

 

 

*

Derived from The Linde Group’s historical consolidated financial statements for the year ended December 31, 2017 translated from euros to U.S. dollars, the reporting currency of the Combined Group, using the exchange rates derived from Bloomberg (average exchange rate of $1.1299 per €1.0000 for the year ended December 31, 2017).

 

 

(g)   Represents the $(13) million of purchase accounting adjustments attributable to noncontrolling interests (see Note 4 (k)), more than offset by the share in net income of Linde AG attributable to non-controlling interest of the 8% of Linde AG Shares which were not tendered in the Exchange Offer ($139 million).

 

(h)   Represents a reduction to interest expense - net related to the estimated long-term debt fair value adjustment required by purchase accounting, which will be amortized through 2030 and corresponds to the period over which the underlying bonds are outstanding (see Note 4(g)). Although the principal amount of the obligation did not change, the long-term debt fair value adjustment results in an increase to debt and a decrease to interest expense of $97 million for the year ended December 31, 2017.

 

(i) Represents the tax effect of purchase accounting adjustments (see Note 4(h)) and the tax effect of Business Combination transaction costs eliminated from Praxair’s and The Linde Group’s historical consolidated statement of income. The effective tax rate is based on the statutory tax rates in the respective jurisdictions where the adjustments have been made.

 

(j) Represents the weighted average shares outstanding for both Linde AG and Praxair, Inc. to illustrate the number of Linde plc Shares that are expected to be issued in connection with the Business Combination. The pro forma number of shares outstanding represents the total number of Linde plc Shares to be issued based on the number of outstanding Linde AG Shares and Praxair Shares as of December 31, 2017, and for the purposes of the unaudited pro forma condensed combined statement of income, is calculated as follows:

 

(In thousands, except per share data, exchange ratio and conversion ratio)

      

Linde plc Shares to be exchanged for Linde AG Shares

  

Linde AG Shares tendered(i)

     170,875  

Linde AG Shares exchange ratio(ii)

     1.540  
  

 

 

 

Linde plc Shares to be exchanged for Linde AG Shares - basic

     263,147  

Linde AG dilutive shares outstanding - dilutive(iii)

     186  

Linde AG Shares exchange ratio(ii)

     1.540  
  

 

 

 
     286  

Linde plc Shares to be exchanged for Linde AG Shares - diluted

     263,433  

Linde plc Shares to be issued to holders of Praxair Shares (the “Praxair Shareholders”) upon conversion of their shares

  

Praxair Shares outstanding

     285,893  

Praxair employee shares that will vest upon the closing of the Merger

     368  
  

 

 

 

Total Praxair Shares converted in the Merger(iv)

     286,261  

Praxair conversion ratio(ii)

     1.000  
  

 

 

 

Linde plc shares to be issued to Praxair Shareholders upon conversion of their shares - Basic

     286,261  

Praxair dilutive shares outstanding - dilutive(v)

     2,853  

Praxair conversion ratio(ii)

     1.000  
  

 

 

 
     2,853  

Linde plc Shares to be issued to Praxair Shareholders upon conversion of their shares - diluted

     289,114  

Total Linde plc Shares

  

Linde plc shares - basic

     549,408  

Linde plc shares - diluted

     552,547  

 

  (i)

Number of Linde AG shares tendered in the Exchange Offer.



 

27


Section B — Issuer

 

  (ii)

Exchange ratio for Linde AG Shares and conversion ratio for Praxair Shares as set forth in the Offer Document and the Business Combination Agreement.

  (iii)

Upon completion of the Business Combination, outstanding Linde AG Share-based compensation awards will partially be settled in cash with no dilutive impact. No adjustments have been recorded to the unaudited pro forma condensed combined balance sheet because a liability has been recorded at December 31, 2017 related to these cash payments. Outstanding unvested Linde AG Share-based compensation awards which will be converted to similar Linde plc awards are estimated to be about 286,000 shares.

  (iv)

Number of shares of Praxair common stock issued and outstanding as of December 31, 2017, including unvested deferred compensation units, which will be converted into Linde plc Shares.

  (v)

Estimated number of dilutive Praxair Shares based on the weighted average share calculation for the year ended December 31, 2017.

 

 

Note 6:   Adjustments to Praxair’s Historical Financial Statements to Conform to IFRS

 

Praxair’s historical consolidated financial statements have been prepared in accordance with U.S. GAAP, which differs in certain material respects from IFRS as adopted by the EU. The unaudited IFRS information includes a statement of financial position and statements of profit and loss of Praxair derived from the historical consolidated financial statements as of and for the year ended December 31, 2017, prepared in accordance with U.S. GAAP. Certain reclassifications of historical Praxair financial statement line items were made to conform to the expected financial statement line items of the Combined Group.

 

Note 7:   Adjustments to Linde AG’s Historical Financial Statements to Conform to Expected Presentation of Linde plc and U.S. dollar translation

 

The Linde Group’s historical consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU. The unaudited U.S. dollar information includes a statement of financial position and statements of profit and loss of The Linde Group derived from the historical consolidated financial statements as of and for the year ended December 31, 2017, prepared in accordance with IFRS as adopted by the EU. This balance sheet as of December 31, 2017 and statements of income for the year ended December 31, 2017 have been adjusted to reflect The Linde Group’s consolidated statement of financial position and statements of profit or loss on a basis consistent with the expected presentation of Linde plc and translated from euros to U.S. dollars, the reporting currency of the Combined Group, using the exchange rates derived from Bloomberg ($1.2005 per €1.0000 as of December 31, 2017, and the average exchange rate of $1.1299 per €1.0000 for the year ended December 31, 2017).

 

Note 8:   Divestitures – Net

 

Represents the reclassification of (i) historical assets to assets classified as held for sale and (ii) historical liabilities to liabilities in connection with assets classified as held for sale and disposal groups as well as (iii) the elimination of historical operations for businesses that are expected to be sold in connection with the Business Combination as a result of the antitrust review process. Specifically:

 

•   $4,751 million were reclassified to assets classified as held for sale from the following non-current assets: goodwill ($690 million); other intangible assets ($131 million); tangible assets ($2,544 million); investments in associates and joint ventures ($251 million); other receivables and other assets ($111 million) and deferred tax assets ($36 million); as well as from the following current assets: inventories ($252 million), trade receivables ($547 million), other receivables and other assets ($115 million), income tax receivables ($18 million) and cash and cash equivalents ($56 million);



 

28


Section B — Issuer
  

•   $1,238 million were reclassified to liabilities in connection with assets classified as held for sale and disposal groups from the following non-current liabilities: provisions for pensions and similar obligations ($90 million); other non-current provisions ($53 million); deferred tax liabilities ($300 million); financial liabilities ($23 million); liabilities from finance leases ($3 million); and other non-current liabilities ($57 million); as well as from the following current liabilities: current provisions ($35 million); short-term debt ($7 million); liabilities from finance leases ($2 million); trade payables ($359 million); other current liabilities ($269 million); and income tax liabilities ($40 million).

 

This adjustment includes assets, liabilities and operations related to:

 

•   the SIAD SPA dated December 5, 2017 whereby Praxair has agreed, inter alia, to sell its non-controlling participation in its Italian joint venture SIAD to its joint venture partner Flow Fin in exchange for Flow Fin’s non-controlling participation in Praxair’s majority-owned Italian joint venture, Rivoira S.p.A., and payment of a net purchase price of approximately €90 million by Praxair to Flow Fin;

 

•   the Praxair Europe SPA dated July 5, 2018 whereby Praxair, Inc. has agreed to sell the majority of its European businesses to Taiyo Nippon Sanso Corporation for €5.0 billion. These businesses generated annual sales of €1.3 billion in 2017;

 

•   the Americas SPA as dated July 16, 2018 (not taking into account any supplement thereto) whereby Linde AG and Praxair, Inc., among others, entered into an agreement with a consortium comprising companies of the German industrial gases manufacturer Messer Group and CVC Capital Partners Fund VII to sell the majority of The Linde Group’s industrial gases business in North America and certain industrial gases business activities of The Linde Group and Praxair in South America for $3.1 billion (after fixed deductions for certain items relating to liabilities of the sold businesses). In 2017, these businesses to be sold generated annual sales of €1.5 billion.

 

The respective purchase price is subject to (further) customary adjustments at closing.

 

Amounts related to additional divestitures in connection with the antitrust approval process, including sales to other purchasers under supplements to the Americas SPA, are not included because the impacts are not expected to be material.

 

See Note 4(o) which includes adjustments to assets and liabilities classified as held for sale to reflect the anticipated net selling price (fair value), net of taxes. Furthermore, see Note 4(p) which reflects the cash receipts for the net divestitures, net of estimated taxes.

B.9    Profit forecast and estimate.    Not applicable. No profit forecast or profit estimate is being presented by Linde plc.
B.10    Qualifications in the audit report on the historical financial information.    Not applicable. There are no qualifications in the audit reports or the historical financial information of the Linde plc Group, Praxair or The Linde Group which are incorporated herein.
B.11    Insufficiency of the issuer’s working capital for its present requirements.   

Not applicable. Linde plc is of the opinion that its working capital is sufficient for its present requirements, that is, for at least the next twelve months from the date of this Prospectus.

 

In the Business Combination Agreement, Praxair, Inc. has agreed to provide financing to Linde plc in order to enable Linde plc to pay certain expenses when due.



 

29


Section C — Securities
C.1    Type and class of the securities being admitted to trading.   

The shares in respect of which Admission is being sought are ordinary shares of Linde plc, nominal value €0.001 per share (“Linde plc Shares”). There will be no application for any other class of shares of Linde plc to be admitted to trading in connection with this Prospectus.

 

When admitted to trading, the Linde plc Shares will be registered with:

 

International Securities Identification Number (ISIN): IE00BZ12WP82;

 

German Securities Identification Number (Wertpapierkennnummer, WKN): A2D SYC;

 

Ticker Symbol: LIN.

C.2    Currency.    The currency of the Linde plc Shares is euro (€).
C.3    The number of shares issued and fully paid and the par value per share.   

The aggregate nominal value of the issued ordinary share capital of Linde plc upon Admission is expected to be up to €558,147.436, divided into up to 558,147,436 ordinary shares of €0.001 each. It is further expected that 263,147,436 Linde plc Shares intended for the settlement of the Exchange Offer will be issued on or about the date hereof and that up to 295,000,000 Linde plc Shares intended for the settlement of the Merger will be issued by the effective time of the Merger. The final number of shares is expected to be determined on or about October 30, 2018. Such shares will be issued fully paid as part of the completion of the Business Combination.

 

The 25,000 A ordinary shares of nominal value of €1.00 each issued and fully paid up as of the date of this Prospectus will, upon issuance of the new Linde plc shares for the settlement of the Exchange Offer and prior to completion of the Business Combination, be converted into, and re-designated as deferred shares of €1.00 each that do not carry voting or dividend rights. Immediately following the issuance of the Linde plc Shares for the settlement of the Exchange Offer and prior to the effective time of the Merger, the aggregate nominal value of the Linde plc Shares in issue will exceed the minimum capitalization requirement under Irish company law and the deferred shares will be acquired and cancelled by Linde plc for nil consideration.

C.4    A description of the rights attached to the securities.   

The rights and responsibilities of the shareholders of Linde plc are governed by Irish law and the Linde plc constitution. The Linde plc Shares will rank pari passu in all respects with each other.

 

The holders of Linde plc Shares are entitled to notice of, and to attend, each general meeting of Linde plc and will receive one vote for each share upon all matters presented to the Linde plc Shareholders at any such general meeting. Subject to any preferences granted to other classes of Linde plc securities that may be outstanding in the future (including any preferred shares), there are no voting right restrictions or preferences with respect to shareholders of Linde plc.



 

30


Section C — Securities
     

The Linde plc Shares which are the subject of this Prospectus will carry full dividend rights following their issuance. The holders of Linde plc Shares are entitled to receive such dividends as the board of directors of Linde plc (the “Linde plc Board of Directors”) from time to time may pay out of funds legally available. Entitlement to dividends is subject to the preferences granted to other classes of securities Linde plc may have outstanding in the future, including any preferred shares, and may be restricted by the terms of Linde plc’s future debt instruments.

 

In the event of liquidation of Linde plc, holders of Linde plc Shares are entitled to share in any assets of Linde plc remaining after satisfaction in full of its liabilities and satisfaction of such dividend and liquidation preferences of holders of other classes of securities of Linde plc, including any preferred shares.

C.5    A description of any restrictions on the free transferability of the securities.    Linde plc Shares are freely transferable in accordance with the legal requirements for registered shares, subject to the Linde plc Board of Directors’ right to refuse to register a transfer in the register of members of Linde plc (the “Linde plc Register of Members”) under the following circumstances:
     

•   the instrument of transfer is not duly stamped, if required, and lodged, accompanied by the certificate (if any) for the shares to which it relates and such other evidence as the Linde plc Board of Directors may reasonably require to show the right of the transferor to make the transfer;

 

•   the instrument of transfer is in respect of more than one class of share;

     

•   the instrument of transfer is in favor of more than four persons jointly;

 

•   the Linde plc Board of Directors is not satisfied that all applicable consents, authorizations, permissions or approvals of any governmental body or agency in Ireland or any other applicable jurisdiction required to be obtained under relevant law prior to such transfer have been obtained; or

 

•   the Linde plc Board of Directors is not satisfied that the transfer would not violate the terms of any agreement to which Linde plc (or any of its subsidiaries) and the transferor are party or subject.

      A transfer of Linde plc Shares from a seller having beneficial ownership of such shares to a purchaser acquiring only beneficial ownership of such shares will not be registered in the Linde plc Register of Members.
C.6    Application for admission to trading on a regulated market and identity of regulated markets where the securities are to be traded.   

On August 27, 2018, Linde plc applied for admission of the Linde plc Shares to listing and trading on the New York Stock Exchange (“NYSE”) (trading in U.S. dollars).

 

On October 22, 2018, Linde plc applied for admission of the Linde plc Shares to listing and trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange and the sub-segment thereof with additional post-admission obligations (Prime Standard) (trading in euros).



 

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Section C — Securities
C.7    Dividend policy.   

The dividend policy for the Combined Group will be determined following the completion of the Business Combination. The Linde plc constitution authorizes the directors to declare interim dividends out of funds lawfully available for the purpose without shareholder approval. The Linde plc Board of Directors may also recommend a dividend to be approved and declared by the Linde plc Shareholders as a final dividend at a general meeting. Any dividend paid or changes to dividend policy are within the discretion of the Linde plc Board of Directors and will depend upon many factors, including distributions of earnings to Linde plc by its subsidiaries, the financial condition and results of operations of the Combined Group, legal requirements, including limitations imposed by Irish law, terms of any outstanding preferred shares, restrictions in any debt agreements that limit its ability to pay dividends to shareholders, restrictions in any series of preferred shares and other factors the Linde plc Board of Directors deems relevant. Linde plc currently expects to pay dividends subject to its ability to do so.

 

Linde plc has not yet determined whether it intends to pay annual dividends (as Linde AG currently does) or quarterly dividends (as Praxair, Inc. currently does) following the completion of the Business Combination. However, it is most probable that Linde plc will pay quarterly dividends to its shareholders, as is common practice of companies with a listing on the NYSE subject to any restrictions under Irish law.

 

Under Irish law, Linde plc may only pay dividends, make distributions and also generally repurchase or redeem shares from its distributable reserves, which are, generally, its accumulated realized profits, so far as not previously utilized by distribution or capitalization, less its accumulated realized losses, so far as not previously written off in a reduction or reorganization of capital duly made. In addition, no distribution or dividend may be made if the net assets of Linde plc are not, or if making such distribution or dividend will cause the net assets of Linde plc to not be, equal to, or in excess of, the aggregate of Linde plc’s called-up share capital plus undistributable reserves. Undistributable reserves include Linde plc’s undenominated capital and the amount by which Linde plc’s accumulated unrealized profits exceeds its accumulated unrealized losses.

 

Since Linde plc has not conducted any material activities other than those incidental to its formation and the matters contemplated by the Business Combination Agreement (including guarantees related to divestitures in connection with the Business Combination), it does not yet have distributable reserves. Linde plc intends to seek the approval of the Irish High Court to create distributable reserves of Linde plc by means of a reduction in capital, which is required for the creation of distributable reserves to be effective, as soon as practicable following the effective time of the Business Combination. Linde plc is expected to obtain the approval of the Irish High Court within 15 weeks after the effective time of the Business Combination.



 

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Section C — Securities
      Until the Irish High Court approval is obtained or distributable reserves are created as a result of profitable operations of Linde plc, Linde plc will not have sufficient distributable reserves to pay dividends or to repurchase or redeem shares following the Business Combination. Although Linde plc is not aware of any reason why the Irish High Court would not approve the creation of distributable reserves, the issuance of the required order is a matter for the discretion of the Irish High Court.

 

Section D — Risks
The key risks discussed below only indicate key information regarding certain key risks as required by Commission Regulation (EC) No 809/2004. They are not exhaustive and are based on certain assumptions made by Linde plc, Praxair and The Linde Group, which later may prove to be incorrect or incomplete. The risks discussed below are not the only risks to which each of Linde plc, Praxair or The Linde Group is exposed. Actual results could differ materially from those expressed in any forward-looking statement. The order in which the risk factors are presented does not reflect the likelihood of their occurrence or the magnitude or significance of the individual risks. Additional risks and uncertainties of which Linde plc, Praxair and The Linde Group are not currently aware or which Linde plc, Praxair and The Linde Group do not consider key risks at present could likewise have a material adverse effect on Linde plc’s, Praxair’s and The Linde Group’s business and cash flows, financial condition and results of operations. The market price of the Linde plc Shares could fall if any of these key risks were to materialize, in which case the respective shareholders could lose all or part of their investment.
D.1    Key information on the key risks that are specific to the issuer or its industry.   

•   Linde plc, Praxair and The Linde Group had to obtain certain governmental and regulatory approvals to consummate the Business Combination. Some of these approvals are subject to restrictions, divestiture or other requirements or other conditions imposed by certain governmental and regulatory agencies, such as the European Commission and the U.S. Federal Trade Commission, which may adversely impact the business, financial condition or results of operations of the Combined Group.

 

•   There are currently, and there may be additional, investigations by public authorities and civil litigation in the context of the Business Combination. If an authority determined that there were violations of applicable laws in the context of the Business Combination or a court held that the Exchange Offer and/or the Merger was not appropriately approved by shareholders or public authorities or validly completed, this could result in the imposition of significant fines and penalties on the Combined Group or require the Business Combination to be partly or fully unwound which would have a material adverse effect on the business, financial condition and results of operations of the Combined Group.

 

•   Upon completion of the Business Combination, certain change of control rights under material agreements will or may be triggered. If parties to agreements with change-of-control provisions exercise such rights, contracts that are beneficial to The Linde Group or Praxair may be terminated which may have an adverse effect on the business, the cash flows and the financial condition and results of operations of the Linde plc Group, Praxair and The Linde Group.



 

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Section D — Risk
     

•   The Business Combination triggered a mandatory takeover offer with respect to Linde AG’s listed local subsidiary in India, and may require mandatory takeover offers in other jurisdictions. This would result in additional transaction costs and complexity.

 

•   The Combined Group may fail to realize the anticipated strategic and financial benefits sought from the Business Combination.

 

•   The Combined Group may be unable to retain and motivate Praxair and/or The Linde Group personnel successfully, which could result in a loss of relevant capabilities and expertise.

 

•   Risk relating to the business of Praxair including risks relating to cost of energy and raw materials and/or disruption in the supply of these materials, the inability to effectively compete, pension benefit plans, operational risks, weakening economic conditions, and international events and circumstances, may adversely impact Praxair’s and the Combined Group’s business, financial position or results of operations.

 

•   Risks relating to the business of The Linde Group, including competition and pricing risk, such as risks relating to cost pressure in the healthcare sector, risks relating to the commercialization of projects, a low oil and natural gas price environment having a potentially negative effect on the general investment climate and thus on the orders situation, increases in the cost of gas, raw materials and energy having potentially negative effects on the costs side, supply chain or other business disruptions as well as risks relating to manufacturing and construction activities, pension scheme commitments, changes in political or social circumstances, potential labor union disputes, risks relating to The Linde Group’s strategic initiatives and risks arising from the acquisition and sale of companies may adversely impact The Linde Group’s and the Combined Group’s business, financial position or results of operations.

 

•   Risks relating to the regulatory environment and legal risks including international government regulations, outcome of litigation or governmental investigations, and claims beyond Praxair’s, The Linde Group’s or the Combined Group’s insurance coverage limits may adversely impact the business, financial position or results of operations of Praxair, The Linde Group and the Linde plc Group.



 

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Section D — Risk
     

•   The Linde Group’s operations are subject to changes in the political, legal and social environment including economic sanctions, which may adversely impact its business or results of operations. The Linde Group’s business is exposed to such risks due to the general political and legal environment arising from applicable international economic sanctions regimes and changes to such regimes. The Linde Group cannot assure that current or future regulations or developments related to economic sanctions will not have a negative impact on its business, results of operations or reputation, in particular resulting from potential future changes in restrictive measures that the United States may adopt with respect to Russia. Potential future economic sanctions imposed on parties doing business with certain Russian parties by the U.S. government may in particular have a substantial impact on The Linde Group’s business in Russia, leading to (i) delays or cancellations of the implementation or execution of existing projects, and (ii) negative effects on developing potential new business of The Linde Group.

 

•   Praxair and The Linde Group are subject to anti-corruption laws in the jurisdictions in which they operate, as well as trade compliance and economic sanctions laws and regulations. A failure to comply with these laws and regulations may subject the companies to civil and criminal penalties, harm their reputation and materially adversely impact their respective businesses or results of operations.

 

•   Risks relating to tax matters including changes in Linde plc’s tax residency (including the possibility of the IRS not agreeing with the conclusion that Linde plc should be treated as a foreign corporation for U.S. federal tax purposes) may affect taxes on dividends, trigger exit charges or otherwise subject the Combined Group to tax costs to which Praxair and The Linde Group (and their shareholders) were not previously subject; risks relating to the tax treatment of the transactions; and risks relating to other changes in tax laws could adversely impact the business, financial position or results of operations of the Combined Group and could have a negative effect on future profitability.

D.3    Key information on the key risks that are specific to the securities.   

•   Risks relating to Linde plc Shares including a volatile market price of Linde plc Shares which could result in shareholders losing part or all of their investment, no guarantee of dividend payments and more difficult enforcement of shareholder rights for foreign shareholders.

Section E — Offer
E.1    Total net proceeds and estimate of the total expenses, including estimated expenses charged to the investor by the issuer.   

There is no offer of Linde plc Shares. This Prospectus does not constitute an offer or invitation to any person to subscribe for or purchase any shares in Linde plc. Linde plc will not receive any proceeds from the listing.

 

The costs related to the listing of the Linde plc Shares on the Frankfurt Stock Exchange are expected to total approximately $6.5 million net of any applicable value added tax. No expenses will be charged to investors in Linde plc Shares by Linde plc.



 

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Section E — Offer
E.2a    Reasons for the offer, use of proceeds, estimated net amount of the proceeds.   

There is no offer of Linde plc Shares. This Prospectus does not constitute an offer or invitation to any person to subscribe for or purchase any shares in Linde plc.

 

Linde plc will not receive any proceeds from the listing.

E.3    Terms and conditions of the offer.    Not applicable. There is no offer of Linde plc Shares. This Prospectus does not constitute an offer or invitation to any person to subscribe for or purchase any shares in Linde plc.
E.4    A description of any interest that is material to the issue including conflicting interests.   

Linde plc has entered into the Business Combination Agreement with Praxair, Inc., Linde AG, Zamalight Holdco and Merger Subco. Such other parties to the Business Combination Agreement are persons acting jointly with Linde plc in the Exchange Offer pursuant to Section 2(5) sentence 1 of the German Takeover Act and have an interest in the completion of the Business Combination.

 

Bank of America Merrill Lynch International Limited Zweigniederlassung Frankfurt am Main, Credit Suisse Securities (USA) LLC, Goldman Sachs AG (“Goldman Sachs”), Morgan Stanley Bank AG and its affiliates (“Morgan Stanley”) as well as Perella Weinberg Partners UK LLP (“Perella Weinberg”) act as financial advisors to Linde AG or Praxair, Inc. in connection with the proposed Business Combination and will receive fees for such services. A portion of the fees of Credit Suisse Securities (USA) LLC, Morgan Stanley and Perella Weinberg and all of Goldman Sachs’ fees are contingent upon completion of the Business Combination towards which the Admission is a necessary step.

 

The Listing Agent and/or its affiliates have engaged, and may in the future from time to time continue to engage in investment banking, financial advisory and ancillary activities in the ordinary course of business with certain members of The Linde Group, Praxair, Linde plc Group or the Combined Group, in respect of which they have and may in the future, receive customary fees and commissions.



 

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Section E — Offer
      Some of the Praxair directors and executive officers as well as some of the members of the executive board of Linde AG (the “Linde AG Executive Board”) and of the supervisory board of Linde AG (the “Linde AG Supervisory Board”) (including, in each case, those who have been appointed to the Linde plc Board of Directors or will be members of the management committee of the Combined Group (the “Management Committee”)) may have interests in the Business Combination that are different from, or in addition to, the interests of Linde plc Shareholders. In the case of Praxair directors and executive officers these interests include (i) the continued service of certain directors and executive officers following the completion of the Business Combination, (ii) the treatment of stock options, restricted stock units and other equity-based awards, (iii) severance benefits available to certain Praxair executive officers upon a qualifying termination following the Business Combination, (iv) treatment of cash amounts deferred or contributed pursuant to Praxair’s compensation deferral programs and retirement plans, and (v) the indemnification of Praxair directors and executive officers. In the case of members of the Linde AG Executive Board and the Linde AG Supervisory Board these interests include (i) the continued or future membership of certain board members on the Linde plc Board of Directors or the Management Committee, (ii) the treatment of equity awards, investment shares and deferral shares of members of the Linde AG Executive Board and the Linde AG Supervisory Board, (iii) the release from the commitment for members of the Linde AG Supervisory Board to acquire and hold Linde AG Shares and other adjustments to the internal share ownership policy for members of the Linde AG Supervisory Board, (iv) severance benefits, and (v) indemnification of members of the Linde AG Executive Board and Linde AG Supervisory Board by Linde plc or any of its subsidiaries. Furthermore, Prof. Dr. Wolfgang Reitzle, current Chairman of the Linde AG Supervisory Board and the Chairman of the Linde plc Board of Directors, is an advisory partner of Perella Weinberg; this advisory mandate has been inactive since June 2016. Perella Weinberg is acting as financial advisor to Linde AG in connection with the Business Combination and will receive fees for such services.
E.5    Name of the person or entity offering to sell the security and lock-up agreements.    Not applicable. This Prospectus does not relate to an offering of shares and there are no lock-up agreements.
E.6    Immediate dilution resulting from the offer.    Not applicable. This Prospectus does not relate to an offering of shares.
E.7    Estimated expenses charged to the investor by the issuer.    Not applicable. Investors will not be charged expenses by Linde plc.


 

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PART II

RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this Prospectus. The occurrence of one or more of the events or circumstances described in these risk factors alone or in combination with other events or circumstances may have a material adverse effect on Praxair’s and The Linde Group’s business and cash flows, financial condition and results of operations and, upon completion of the Business Combination, on the Combined Group’s business and cash flows, financial condition and results of operations. The Business Combination comprises (i) the merger of an indirect subsidiary of Linde plc with and into Praxair, Inc. (“Praxair, Inc.” and, together with its subsidiaries, “Praxair”), as a result of which Praxair, Inc. will become a wholly-owned indirect subsidiary of Linde plc (the “Merger”) and (ii) a voluntary public exchange offer, which was published by Linde plc on August 15, 2017, to acquire each outstanding share in Linde Aktiengesellschaft (“Linde AG” and, together with its subsidiaries, “The Linde Group”) (the “Linde AG Shares”) for 1.540 ordinary shares in Linde plc (the “Linde plc Shares”) (the “Exchange Offer” and, together with the Merger, the “Business Combination”). While there is no assurance that the Business Combination will be completed, certain of the risks discussed below are presented assuming the Business Combination is completed and the Linde plc Group after the completion of the Business Combination (the “Combined Group”) exists.

The risks discussed below may prove not to be exhaustive and are based on certain assumptions made by Linde plc, Praxair and The Linde Group, which later may prove to be incorrect or incomplete. The risks discussed below may not be the only risks to which each of Linde plc, Praxair or The Linde Group is exposed. They should be considered in connection with evaluating the forward-looking statements in section 3.1 because they could cause actual results to differ materially from those expressed in any forward-looking statement. The order in which the risk factors are presented does not reflect the likelihood of their occurrence or the magnitude or significance of the individual risks. Additional risks and uncertainties of which Linde plc, Praxair and The Linde Group are not currently aware or which Linde plc, Praxair and The Linde Group do not consider significant at present could likewise have a material adverse effect on Linde plc’s, Praxair’s and The Linde Group’s business and cash flows, financial condition and results of operations. The market price of the Linde plc Shares could fall if any of these risks were to materialize, in which case the respective shareholders could lose all or part of their investment.

 

2.1

Risks Relating to the Business Combination

 

2.1.1

Linde plc, Praxair and The Linde Group had to obtain certain governmental and regulatory approvals to consummate the Business Combination. Some of these approvals are subject to restrictions, divestiture or other requirements or other conditions imposed by certain governmental and regulatory agencies, such as the European Commission and the U.S. Federal Trade Commission, which may adversely impact the business, financial condition or results of operations of the Combined Group.

Completion of the Business Combination was conditioned upon regulatory approvals or expiration or termination of statutory waiting periods (including extensions thereof) under certain merger control and competition law regimes. As a condition to their approval of the transactions contemplated by the Business Combination Agreement, certain governmental and regulatory agencies, such as the European Commission and the U.S. Federal Trade Commission (“FTC”), have imposed divestiture requirements and/or restrictions on the conduct of the Linde plc Group’s, Praxair’s and The Linde Group’s respective businesses. Conditions imposed by regulatory agencies in connection with their approval of the Business Combination include, among others, changes to the operations of Praxair and/or The Linde Group, restrictions on the Combined Group’s ability to operate in certain jurisdictions following the Business Combination and restrictions on the combination of Praxair’s and The Linde Group’s operations. Such restrictions, in particular, include the obligations set forth in the agreement with the FTC dated October 1, 2018 (the “Consent Agreement”), pursuant to which Linde plc, Praxair, Inc. and Linde AG shall (i) divest certain assets within 120 days from the effectiveness of the Consent Agreement and (ii) continue to operate Praxair and The Linde Group as independent and competitive businesses, held globally separate until certain divestitures required by the FTC have been completed. In the event that the assets are not sold within the ordered 120 days from the effectiveness of the Consent Agreement, the FTC may appoint a divestiture trustee to sell such assets in order to satisfy the requirements under the Consent Agreement. For a period of 30 days starting on October 22, 2018, the Consent Agreement is subject to public comments which may affect the FTC’s commitment or lead to adjustments to the Consent Agreement.

 

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Such Consent Agreement may have a significant adverse effect on the anticipated benefits of the Business Combination, in particular the expected targeted annual synergies and cost efficiencies ranging from $1.1 billion to $1.2 billion to be achieved over approximately three years (the figure includes existing cost reduction programs of Praxair and The Linde Group which are independent of the Business Combination as well as additionally identified cost reduction potentials). The Consent Agreement may delay the envisaged integration of the Combined Group, restrict the Combined Group’s ability to modify the operations of its businesses in response to changing circumstances for a period of time after completion of the Business Combination or its ability to expend cash for other uses, result in the sale of certain assets to prices which are significantly lower than expected and under other unfavorable circumstances or otherwise adversely impact the business, financial condition or results of operations of the Combined Group.

Praxair and The Linde Group have committed, and may have to commit, to divest certain assets in order to obtain certain regulatory approvals or comply with conditions imposed in connection with certain regulatory approvals, which may result in loss of value or expertise due to the loss of those assets or businesses or a sale of those assets or businesses at less than the desired price or under otherwise unfavorable conditions, in particular as a result of timing constraints and the limited universe of buyers acceptable to the regulatory authorities, especially in challenging market conditions. In some cases, where the relevant regulatory authority has only preliminarily or not yet at all approved of a buyer, it may be necessary to find a (new) buyer for the relevant assets under terms which may be less favorable to the Combined Group. The assets which Praxair and The Linde Group have committed to divest are located mainly in Europe and the Americas (see “5.3.2 Significant Divestitures agreed in light of the Business Combination”). The restrictions, divestiture or other requirements or other conditions imposed by regulators could have a material adverse effect on the business, results of operations, financial condition and prospects of the Combined Group and substantially reduce or eliminate the synergies, cost reductions and the advantages which Linde plc, Praxair and The Linde Group expect to achieve from the Business Combination, see also “2.2.1 The Combined Group may fail to realize the anticipated strategic and financial benefits sought from the Business Combination.”.

 

2.1.2

There are currently, and there may be additional, investigations by public authorities and civil litigation in the context of the Business Combination. If an authority determined that there were violations of applicable laws in the context of the Business Combination or a court held that the Exchange Offer and/or the Merger was not appropriately approved by shareholders or public authorities or validly completed, this could result in the imposition of significant fines and penalties on the Combined Group or require the Business Combination to be partly or fully unwound which would have a material adverse effect on the business, financial condition and results of operations of the Combined Group.

In connection with the Business Combination, third parties, including public authorities, have initiated, and may in the future initiate, investigations and/or file lawsuits against Praxair, The Linde Group, Linde plc and/or their respective directors and management.

By letter dated February 23, 2018, BaFin informed Linde AG that it has commenced administrative fine proceedings against Linde AG regarding an alleged omission to issue an ad hoc announcement under Article 17 of Regulation (EU) No 596/2014 of the European Parliament and of the Council of April 16, 2014 on market abuse (“EU Market Abuse Regulation”) in the context of the preliminary talks between Linde AG and Praxair, Inc. from June through August 2016 and an alleged belated ad hoc announcement under Article 17 of the EU Market Abuse Regulation with respect to the departure of then Chief Financial Officer of Linde AG, Mr. Georg Denoke, from office in September 2016. Linde AG has submitted a statement of defense in these administrative fine proceedings. The administrative fine proceedings are ongoing. Potential remedies in the event of an adverse determination include administrative fines of up to 2% of revenue of The Linde Group in the preceding financial year per violation.

 

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On October 20, 2017, with the support of the German shareholders’ association DSW – Deutsche Schutzvereinigung für Wertpapierbesitz e.V. (“DSW”), seven holders of Linde AG Shares (“Linde AG Shareholders”) have initiated judicial proceedings in the district court of Munich (Landgericht München I) requesting a declaratory judgment that the execution of the Business Combination Agreement had required a prior approval by a general shareholders’ meeting of Linde AG. Linde AG considers these allegations to be without merit and submitted statements of defense in these proceedings. A court hearing took place on July 26, 2018, and proceedings are still ongoing. Linde AG is of the opinion that no such approval was required under German corporate law. However, no assurance can be given regarding the outcome of the judicial proceedings. If a court declared that the execution of the Business Combination Agreement required the prior approval by a general shareholders’ meeting of Linde AG, Linde AG shareholders could initiate civil litigation against Linde AG claiming damages.

Following the consummation of the Business Combination, public authorities, Linde AG Shareholders or Praxair Shareholders or others, may challenge various aspects of the Business Combination, including the validity of the exchange of Praxair Shares or Linde AG Shares into Linde plc Shares. Such claimants may challenge Linde plc’s compliance with post-closing operational commitments made to regulatory authorities or shareholders may challenge the consummation of the Business Combination on procedural grounds, such as that not all required governmental and regulatory approvals have been obtained or have been or have remained valid and that, therefore, not all conditions to the Business Combination have been satisfied.

In connection with any such investigation or litigation, Linde plc, Praxair or The Linde Group may incur significant costs, including management time, and an adverse outcome could result in reputational harm to the Combined Group as well as significant administrative fines, penalties and damages. Moreover, if a court held that the Exchange Offer and/or the Merger lacked any required approval by governmental or regulatory authorities and/or was not validly completed, this could affect the validity of the Business Combination, the transfer of the tendered Linde AG Shares and the allotment and/or the issue of the Linde plc Shares, in which case shareholders might be entitled to claim back their tendered shares or be called upon to pay up amounts not paid up on the Linde plc shares which have been issued. This could require the Business Combination to be partly or fully unwound which would have a material adverse effect on the business, financial condition and results of operations of the Combined Group.

 

2.1.3

Negative publicity related to the Business Combination, including post-closing integration measures, may materially adversely affect the Linde plc Group, Praxair and The Linde Group.

Political and public sentiment in connection with the Business Combination and associated integration measures may result in adverse press coverage and other adverse public statements affecting the parties to the Business Combination. Adverse press coverage and public statements, whether or not driven by political or popular sentiment, may also result in legal claims or investigations by regulators, legislators and law enforcement officials. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceedings, can divert the time and effort of senior management from operating their businesses. Addressing any adverse publicity, governmental scrutiny or enforcement or other legal proceedings could be time-consuming and expensive and, regardless of the factual basis for the assertions being made, could have a negative impact on the reputation of the Linde plc Group, Praxair and The Linde Group, on the morale and performance of their employees and on their relationships with regulators, suppliers and customers. It may also have a negative impact on their ability to take timely advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on the Linde plc Group’s, Praxair’s and The Linde Group’s respective business and cash flows, financial condition and results of operations.

 

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2.1.4

Upon completion of the Business Combination, certain change-of-control rights under material agreements will or may be triggered.

Praxair and The Linde Group are parties to agreements that contain change-of-control provisions that will or may be triggered upon completion of the Business Combination. Upon triggering of these change-of-control provisions, the counterparties to the agreements may be able to exercise certain rights that have a negative effect on Praxair, The Linde Group or, after completion of the Business Combination, the Combined Group. For example, the terms of most of The Linde Group’s notes with a nominal value of approximately €6.7 billion outstanding as of June 30, 2018 (approximately €7.1 billion as of December 31, 2017) include change of control rights which are triggered by a change of control of Linde AG if such change of control were to result in a below investment grade ratings downgrade of Linde AG’s senior unsecured credit rating by Moody’s Investors Services or Standard & Poor’s Rating Services. If parties to agreements with change-of-control provisions exercise such rights, certain contracts that are beneficial to The Linde Group or Praxair may be terminated which may have an adverse effect on the business, the cash flows and the financial condition and results of operations of the Linde plc Group, Praxair and The Linde Group.

 

2.1.5

The Business Combination triggered a mandatory takeover offer with respect to Linde AG’s listed local subsidiary in India, and may require mandatory takeover offers in other jurisdictions.

The completion of the Business Combination will result in Linde plc acquiring indirect control in Linde AG’s subsidiaries listed on local stock exchanges. Should relevant conditions under local laws of individual jurisdictions be met, and if an exemption is not available or granted under the respective regulations, the Business Combination may trigger the obligation to make a public offer with respect to the outstanding shares in certain of Linde AG’s subsidiaries that are publicly listed. To the extent that Linde plc is unable to obtain any applicable exemption, potentially costly and complex takeover procedures may have to be conducted. For example, the Business Combination triggered a mandatory takeover offer with respect to Linde India Limited, Linde AG’s listed local subsidiary in India, which will require Linde plc, subject to and following the completion of the Business Combination, to make a public offer to all outside shareholders of Linde India Limited. In this respect, Linde plc considers further potential structural measures under Indian law which may include measures to delist the subsidiary and could result in significantly higher transaction costs and complexity.

In addition, the granting of any applicable exemption may depend on the discretion of the competent authority and may also depend on the competent authority’s interpretation of the applicable laws and regulations, including the need for any application for any such exemption. No assurance can be provided that the respective competent authorities will grant the requested exemptions or will confirm that no mandatory takeover offers with respect to any such listed subsidiaries will be required as a result of the Business Combination, even if such authority may have granted exemptions for similar transactions in the past. Accordingly, in addition to the mandatory takeover offer in India, the Business Combination may, subject to and following the completion of the Business Combination, also require mandatory takeover offers in other jurisdictions, which would result in additional transaction costs and complexity.

 

2.1.6

Praxair and The Linde Group have incurred and will continue to incur significant transaction fees and costs in connection with the Business Combination.

Praxair and The Linde Group have incurred and will continue to incur significant banking, legal, accounting and other transaction fees and costs related to the Business Combination. Praxair and The Linde Group currently estimate that an aggregate of approximately $321 million of auditors’, banking, legal and other professional fees and costs related to the Business Combination will be incurred from the initiation of the Business Combination through its completion, of which approximately 40% is expected to be incurred by Praxair and approximately 60% is expected to be incurred by The Linde Group. Additional costs substantially in excess of currently anticipated costs may be incurred in connection with the integration of the businesses of Praxair and The Linde Group.

 

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Any cost savings or other efficiencies related to the integration of the businesses that could offset these transaction- and combination-related costs over time may not be achieved in the near term, or at all. In addition, the timeline in which any cost savings are expected to be realized is lengthy and may not be achieved. Failure to realize these synergies and cost reductions and other efficiencies in a timely manner or at all could have a material adverse effect on the Linde plc Group’s, Praxair’s and The Linde Group’s respective businesses and cash flows, financial condition and results of operations.

 

2.1.7

The Linde plc Group has no operating or financial history and the unaudited pro forma condensed combined financial information contained in this Prospectus is presented for illustrative purposes only and may not be an indication of the Combined Group’s results of operations or financial condition following the completion of the Business Combination. The actual results of operations and financial condition of the Combined Group following the completion of the Business Combination may be substantially different.

The Linde plc Group has no operating history and no revenues and the unaudited pro forma condensed combined financial information (“Pro Forma Financial Information”) contained in this Prospectus describes a hypothetical situation and is presented for illustrative purposes only. The Pro Forma Financial Information should not be considered to be an indication of what the Combined Group’s results of operations or financial condition would have been had the Business Combination already been effected during the relevant periods or as of the relevant dates and of what the Combined Group’s future results of operations or financial condition may be following the completion of the Business Combination. The Pro Forma Financial Information has been derived from the historical financial statements of Praxair, Inc. and Linde AG and adjustments, assumptions and preliminary estimates have been made in connection with the preparation of this information. These adjustments, assumptions and estimates are preliminary and based on information available at the time of the preparation of this Prospectus and are subject to change. As a result, the actual results of operations and financial condition of the Combined Group following the completion of the Business Combination may not be consistent with, or evident from, the Pro Forma Financial Information, and any differences may be material. See “8.2 Basis of Presentation” for further information on the presentation of the Pro Forma Financial Information. Linde plc expects differences between preliminary estimates in the Pro Forma Financial Information and the final acquisition accounting which could result in a material difference between the Pro Forma Financial Information and Linde plc’s future consolidated results of operations and financial condition. Therefore, investors should not place undue reliance on the Pro Forma Financial Information.

 

2.2

Risks Relating to the Business of the Combined Group After Completion of the Business Combination

Due to the size and geographic reach of the Combined Group’s operations following the anticipated completion of the Business Combination, a wide range of factors could materially affect its operations and financial performance. Linde plc believes that, in addition to the risks described herein, the risks relating to Praxair’s and The Linde Group’s current businesses (prior to completion of the Business Combination and any related divestitures) described in the sections “2.3 Risks Relating to the Business of Praxair” and “2.4 Risks Relating to the Business of The Linde Group,” which you are urged to read, may significantly impact the Combined Group’s business after the completion of the Business Combination.

 

2.2.1

The Combined Group may fail to realize the anticipated strategic and financial benefits sought from the Business Combination.

The Combined Group may not realize all of the anticipated benefits of the Business Combination. The success of the Business Combination will depend on, among other things, Linde plc Group’s ability to combine Praxair’s business with The Linde Group’s business in a manner that facilitates growth and realizes the anticipated annual synergies and cost reductions without adversely affecting current revenues and investments in future growth. Risks relating to restrictions, requirements or other conditions imposed by certain governmental and regulatory agencies, which may adversely impact the business, financial condition or results of operations of the Combined Group, are described under “2.1.1 Linde plc, Praxair and The Linde Group had to obtain certain governmental and regulatory approvals to consummate the Business Combination. Some of these approvals are subject to restrictions, divestiture or other requirements or other conditions imposed by certain governmental and regulatory agencies, such as the European Commission and the U.S. Federal Trade Commission, which may adversely impact the business, financial condition or results of operations of the Combined Group.

 

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The actual integration of Praxair and The Linde Group will involve complex operational, technological and personnel-related challenges. This process will be time-consuming and expensive, and it may be disruptive to the business of the Combined Group. The Combined Group may not realize all of the anticipated benefits of the Business Combination. Difficulties in the integration of the businesses, which may result in significant costs and delays, include:

 

   

managing a significantly larger combined group;

 

   

aligning and executing the strategy of the Combined Group;

 

   

integrating and unifying the offerings and services available to customers and coordinating distribution and marketing efforts in geographically separate organizations;

 

   

coordinating corporate and administrative infrastructures and aligning insurance coverage;

 

   

coordinating accounting, reporting, information technology, communications, administration and other systems;

 

   

addressing possible differences in corporate cultures and management philosophies;

 

   

the Combined Group becoming subject to Irish laws and regulations and legal action in Ireland;

 

   

coordinating the compliance program and creating uniform financial reporting, information technology and other standards, controls, procedures and policies;

 

   

the implementation, ultimate impact and outcome of potential post-completion reorganization transactions, which may be delayed or not take effect as a result of litigation or otherwise;

 

   

unforeseen and unexpected liabilities related to the Business Combination or the Combined Group’s business;

 

   

managing tax costs or inefficiencies associated with integrating the operations of the Combined Group;

 

   

identifying and eliminating redundant and underperforming functions and assets;

 

   

effecting actions that may be required in connection with obtaining regulatory approvals; and

 

   

a deterioration of credit ratings.

These and other factors could result in increased costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue and earnings, which could materially impact the Combined Group’s business, financial condition and results of operations. The integration process and other disruptions resulting from the Business Combination may also adversely affect the Combined Group’s relationships with employees, suppliers, customers, distributors, licensors and others with whom Praxair and The Linde Group have business or other dealings, and difficulties in integrating the businesses of Praxair and The Linde Group could harm the reputation of the Combined Group.

If the Combined Group is not able to successfully combine the businesses of Praxair and The Linde Group in an efficient, cost-effective and timely manner, the anticipated benefits and cost savings of the Business Combination may not be realized fully, or at all, or may take longer to realize than expected.

 

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2.2.2

Linde plc intends to pursue a cash-merger squeeze-out with respect to Linde AG following completion of the Business Combination. If the effectiveness of such squeeze-out is delayed as a result of litigation or otherwise or does not occur, this may have an adverse effect on the ability to realize synergies and cost reductions and on the market value of Linde plc Shares.

Following completion of the Business Combination, Linde AG will be an indirect subsidiary of Linde plc and, thus, a dependent company within the meaning of Section 17 of the German Stock Corporation Act. The legal framework for this dependency between Linde plc and Linde AG is, subject to other applicable law, set forth in Sections 311 et seq. of the German Stock Corporation Act, which may prevent or impede the realization of synergies and cost reductions absent certain post-closing reorganization transactions, including a cash-merger squeeze-out under German law. Following completion of the Business Combination, Linde plc intends to pursue a cash-merger squeeze-out with respect to Linde AG to effect a squeeze-out of the remaining minority outside Linde AG Shareholders. If the effectiveness of such squeeze-out is delayed as a result of litigation or otherwise or does not occur, Linde plc may be unable to initiate any transactions or measures that are disadvantageous to Linde AG, unless Linde plc provides adequate compensation to Linde AG, which may preclude Linde plc from implementing certain transactions related to the integration of The Linde Group into the Combined Group, including realizing synergies. The failure to realize synergies may lead to a decline of the market value of Linde plc Shares.

 

2.2.3

The Combined Group may experience a loss of customers or may fail to win new customers.

Following the completion of the Business Combination, and particularly in light of divestitures in connection with the merger control review of the Business Combination (see “2.1.1 Linde plc, Praxair and The Linde Group had to obtain certain governmental and regulatory approvals to consummate the Business Combination. Some of these approvals are subject to restrictions, divestiture or other requirements or other conditions imposed by certain governmental and regulatory agencies, such as the European Commission and the U.S. Federal Trade Commission, which may adversely impact the business, financial condition or results of operations of the Combined Group.” and “5.3.2 Significant Divestitures agreed in light of the Business Combination”), third parties with whom Praxair or The Linde Group had relationships prior to the announcement of the Business Combination may terminate or otherwise reduce the scope of their relationships with either party in anticipation or after the completion of the Business Combination. Furthermore, any pending divestment decisions could increase the uncertainty for customers in the case of upcoming extensions of multiannual onsite contracts, i.e. contracts for the supply of industrial gases over a period of several years through a plant usually built and operated by an industrial gas company at the customer’s premises, which, in turn, may lead to a loss of customers. In addition, the Combined Group may face difficulties in acquiring new customers. Any such loss of business or the inability to win new customers could limit the Combined Group’s ability to achieve the anticipated benefits of the Business Combination.

 

2.2.4

The Combined Group may be unable to retain and motivate current Praxair and/or The Linde Group personnel successfully, which could result in a loss of relevant capabilities and expertise.

The success of the Business Combination will depend, in part, on the Combined Group’s ability to retain the talents and dedication of key employees, including key decision-makers, currently employed by Praxair and The Linde Group. Such employees may decide not to remain with Praxair and The Linde Group, as applicable, while the Business Combination is pending or with the Combined Group after the Business Combination is completed. If key employees terminate their employment, or if an insufficient number of employees are retained to maintain effective operations, the Combined Group’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating Praxair and The Linde Group to hiring suitable replacements, all of which may cause the Combined Group’s business to deteriorate. Praxair and The Linde Group may not be able to locate suitable replacements for any key employees who leave either company, or offer employment to potential replacements on reasonable terms. In addition, the Combined Group may not be able to motivate certain key employees following the completion of the Business Combination due to organizational changes, reassignments of responsibilities, the perceived lack of appropriate opportunities for advancement or other reasons. If the Combined Group fails to successfully retain and motivate the employees of Praxair and/or The Linde Group, relevant capabilities and expertise may be lost which may have an adverse effect on the cash flows and the financial condition and results of operations of the Combined Group.

 

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2.3

Risks Relating to the Business of Praxair

Due to the size and geographic reach of Praxair’s operations, a wide range of factors, many of which are outside of Praxair’s control, could materially affect its future operations and financial performance. Praxair’s management believes the following risks may significantly impact Praxair:

 

2.3.1

General Economic Conditions — Weakening economic conditions in markets in which Praxair does business may adversely impact Praxair’s financial results and/or cash flows.

Praxair serves a diverse group of industries across more than 50 countries, which generally leads to financial stability through various business cycles. However, a broad decline in general economic or business conditions in the industries served by its customers could adversely affect the demand for Praxair’s products and impair the ability of its customers to satisfy their obligations to Praxair, resulting in uncollected receivables and/or unanticipated contract terminations or project delays. In addition, many of Praxair’s customers are in businesses that are cyclical in nature, such as the chemicals, electronics, metals and energy industries. Downturns in these industries may adversely impact Praxair during these cycles. Additionally, such conditions could impact the utilization of Praxair’s manufacturing capacity which may require it to recognize impairment losses on tangible assets such as property, plant and equipment, as well as intangible assets such as goodwill, customer relationships or intellectual property.

 

2.3.2

Cost and Availability of Raw Materials and Energy — Increases in the cost of energy and raw materials and/or disruption in the supply of these materials could result in lost sales or reduced profitability.

Energy is the single largest cost item in the production and distribution of industrial gases. Most of Praxair’s energy requirements are in the form of electricity, natural gas and diesel fuel for distribution. Praxair attempts to minimize the financial impact of variability in these costs through the management of customer contracts and reducing demand through operational productivity and energy efficiency. Large customer contracts typically have escalation and pass-through clauses to recover energy and feedstock costs. Such attempts may not successfully mitigate cost variability, which could negatively impact Praxair’s financial condition or results of operations. The supply of energy has not been a significant issue in the geographic areas where Praxair conducts business. However, regional energy conditions are unpredictable and may pose future risk.

For carbon dioxide, carbon monoxide, helium, hydrogen, specialty gases and surface technologies, raw materials are largely purchased from outside sources. Where feasible, Praxair sources several of these raw materials, including carbon dioxide, hydrogen and calcium carbide, as chemical or industrial byproducts. In addition, Praxair has contracts or commitments for, or readily available sources of, most of these raw materials; however, their long-term availability and prices are subject to market conditions. A disruption in supply of such raw materials could impact Praxair’s ability to meet contractual supply commitments.

 

2.3.3

International Events and Circumstances — Praxair’s international operations are subject to the risks of doing business abroad and international events and circumstances may adversely impact its business, financial condition or results of operations.

Praxair has substantial international operations which are subject to risks including devaluations in currency exchange rates, transportation delays and interruptions, political and economic instability and disruptions, restrictions on the transfer of funds, the imposition of duties and tariffs, import and export controls, changes in governmental policies, labor unrest, possible nationalization and/or expropriation of assets, domestic and international tax laws and compliance with governmental regulations. These events could have an adverse effect on the international operations of Praxair in the future by reducing the demand for its products, decreasing the prices at which it can sell its products, reducing the U.S. dollar value of revenue from international operations or otherwise having an adverse effect on its business.

 

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2.3.4

Global Financial Markets Conditions — Macroeconomic factors may impact Praxair’s ability to obtain financing or increase the cost of obtaining financing which may adversely impact Praxair’s financial results and/or cash flows.

Volatility and disruption in the U.S. and global credit and equity markets, from time to time, could make it more difficult for Praxair to obtain financing for its operations and/or could increase the cost of obtaining financing. In addition, Praxair’s borrowing costs can be affected by short- and long-term debt ratings assigned by independent rating agencies which are based, in significant part, on its performance as measured by certain criteria such as interest coverage and leverage ratios. A decrease in these debt ratings could increase the cost of borrowing or make it more difficult to obtain financing. While the impact of volatility in the global credit markets cannot be predicted with certainty, Praxair believes that it has sufficient operating flexibility, cash reserves, and funding sources to maintain adequate amounts of liquidity to meet its business needs around the world.

 

2.3.5

Competitor Actions — The inability to effectively compete could adversely impact Praxair’s results of operations.

Praxair operates within a highly competitive environment worldwide. Competition is based on price, product quality, delivery, reliability, technology and service to customers. Competitors’ behavior related to these areas could potentially have significant impacts on Praxair’s financial results.

 

2.3.6

Catastrophic Events — Catastrophic events could disrupt the operations of Praxair and/or its customers and suppliers and may have a significant adverse impact on the results of operations.

The occurrence of catastrophic events or natural disasters such as extreme weather, including hurricanes and floods; health epidemics; and acts of war or terrorism, could disrupt or delay Praxair’s ability to produce and distribute its products to customers and could potentially expose Praxair to third-party liability claims. In addition, such events could impact Praxair’s customers and suppliers resulting in temporary or long-term outages and/or the limitation of supply of energy and other raw materials used in normal business operations. To mitigate these risks, Praxair evaluates the direct and indirect business risks, consults with vendors, insurance providers and industry experts, makes investments in suitably resilient design and technology, and conducts regular reviews of the business risks with management. Despite these steps, however, these situations are outside Praxair’s control and may have a significant adverse impact on its financial results.

 

2.3.7

Retaining Qualified Personnel — The inability to attract and retain qualified personnel may adversely impact Praxair’s business.

If Praxair fails to attract, hire and retain qualified personnel, it may not be able to develop, market or sell its products or successfully manage its business. Praxair is dependent upon a highly skilled, experienced and efficient workforce to be successful. Much of Praxair’s competitive advantage is based on the expertise and experience of key personnel regarding marketing, technology, manufacturing and distribution infrastructure, systems and products. The inability to attract and hire qualified individuals or the loss of key employees in very skilled areas could have a negative effect on Praxair’s financial results.

 

2.3.8

Technological Advances — If Praxair fails to keep pace with technological advances in the industry or if new technology initiatives do not become commercially accepted, customers may not continue to buy Praxair’s products and results of operations could be adversely affected.

Praxair’s research and development is directed toward developing new and improved methods for the production and distribution of industrial gases and the development of new markets and applications for the use of these gases. This results in the frequent introduction of new industrial gas applications and the development of new advanced air separation process technologies. Praxair also conducts research and development for its surface technologies to improve the quality and durability of coatings and the use of specialty powders for new applications and industries. As a result of these efforts, Praxair develops new and proprietary technologies and employs necessary measures to protect such technologies within the global geographies in which Praxair operates. These technologies help Praxair to create a competitive advantage and to provide a platform to grow its business. If Praxair’s research and development activities do not keep pace with competitors or if Praxair does not create new technologies that benefit customers, future results of operations could be adversely affected.

 

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2.3.9

Pension Liabilities — Risks related to pension benefit plans may adversely impact Praxair’s results of operations and cash flows.

Pension benefits represent significant financial obligations that will be ultimately settled in the future with employees who meet eligibility requirements. Because of the uncertainties involved in estimating the timing and amount of future payments and asset returns, significant estimates are required to calculate pension expense and liabilities related to Praxair’s plans. Praxair utilizes the services of independent actuaries, whose models are used to facilitate these calculations. Several key assumptions are used in the actuarial models to calculate pension expense and liability amounts recorded in the consolidated financial statements. In particular, significant changes in actual investment returns on pension assets, discount rates, or legislative or regulatory changes could impact future results of operations and required pension contributions.

 

2.3.10

Operational Risks — Operational risks may adversely impact Praxair’s business or results of operations.

Praxair’s operating results are dependent on the continued operation of its production facilities and its ability to meet customer contract requirements and other needs. Insufficient or excess capacity threatens Praxair’s ability to generate competitive profit margins and may expose Praxair to liabilities related to contract commitments. Operating results are also dependent on Praxair’s ability to complete new construction projects on time, on budget and in accordance with performance requirements. Failure to do so may expose Praxair’s business to loss of revenue, potential litigation and loss of business reputation.

Also inherent in the management of Praxair’s production facilities and delivery systems, including storage, vehicle transportation and pipelines, are operational risks that require continuous training, oversight and control. Material operating failures at production, storage facilities or pipelines, including fire, toxic release and explosions, or the occurrence of vehicle transportation accidents could result in loss of life, damage to the environment, loss of production and/or extensive property damage, all of which may negatively impact Praxair’s financial results.

 

2.3.11

Information Technology Systems — Praxair may be subject to information technology system failures, network disruptions and breaches in data security.

Praxair relies on information technology (“IT”) systems and networks for business and operational activities, and also stores and processes sensitive business and proprietary information in these systems and networks. These systems are susceptible to outages due to fire, flood, power loss, telecommunications failures, viruses, break-ins and similar events, or breaches of security. Praxair has taken steps to address these risks and concerns by implementing advanced security technologies, internal controls, network and data center resiliency and recovery process. Despite these steps, however, operational failures and breaches of security from increasingly sophisticated cyber threats could lead to the loss or disclosure of confidential information, result in regulatory actions and have a material adverse impact on Praxair’s operations, reputation and financial results.

 

2.3.12

Acquisitions and Joint Ventures — The inability to effectively integrate acquisitions or collaborate with joint venture partners could adversely impact Praxair’s financial position and results of operations.

In addition to the proposed Business Combination, Praxair has evaluated and expects to continue to evaluate, a wide array of potential strategic acquisitions and joint ventures. Many of these transactions, if consummated, could be material to its financial condition and results of operations. In addition, the process of integrating an acquired company, business or group of assets may create unforeseen operating difficulties and expenditures. Although historically Praxair has been successful with its acquisition strategy and execution, the areas where Praxair may face risks include:

 

   

the need to implement or remediate controls, procedures and policies appropriate for a larger public company at companies that prior to the acquisition lacked these controls, procedures and policies;

 

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diversion of management time and focus from operating existing business to acquisition integration challenges;

 

   

cultural challenges associated with integrating employees from the acquired company into the existing organization;

 

   

the need to integrate each company’s accounting, management information, human resources and other administrative systems to permit effective management;

 

   

difficulty with the assimilation of acquired operations and products;

 

   

failure to achieve targeted synergies and cost reductions; and

 

   

inability to retain key employees and business relationships of acquired companies.

Foreign acquisitions and joint ventures involve unique risks in addition to those mentioned herein, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. Also, the anticipated benefit of potential future acquisitions may not materialize. Future acquisitions or dispositions could result in the incurrence of debt, contingent liabilities or amortization expenses, or impairments of goodwill, any of which could adversely impact Praxair’s financial results.

 

2.4

Risks Relating to the Business of The Linde Group

 

2.4.1

Weakening economic conditions in markets in which The Linde Group operates may adversely impact its business or results of operations.

As a company with global operations, The Linde Group is subject to cyclical trends and the general development of the global economy.

Since the global financial crisis, Europe has been facing significant challenges in economic costs, security vulnerability, uncertainties regarding stability of the European Union, overall standing of the monetary union of the countries using the euro as their common currency (the “Eurozone”) and political instability. There is the risk that the economic stagnation in certain countries in the Eurozone including Greece, Italy, Portugal and Spain may continue which may also have negative spill-over effects on other, more stable, countries such as Germany.

The United Kingdom referendum on the withdrawal from the European Union by the United Kingdom, commonly referred to as “Brexit”, and related United Kingdom government action, as well as the related economic consequences, have created significant uncertainty about the future relationship between the United Kingdom and the European Union, which could also have a negative impact on the investment climate and the growth prospects for Europe. In addition, Brexit has also given rise to populist and nationalist calls for the governments of other European Union member states to consider withdrawal from the European Union. These developments or the perception that any of them could occur may have a material adverse effect on global economic conditions. Moreover, the rising popularity of Eurosceptic parties in many European Union member states is a further long-term source of uncertainty for the stability of the European Monetary Union. A disintegration of such monetary union could have a serious impact on both the global real economy and the financial markets.

Furthermore, the Unites States may be facing a variety of significant political and economic challenges, among others, due to lack of bipartisan cooperation between the leading political parties within the United States as well as controversial policy changes in areas such as economic sanctions, trade protectionism and government intervention in business. The administration in the United States has begun introducing new legislation and is expected to continue to bring about further reforms regarding, among other topics, foreign trade, tax, imports, economic, health and energy-related policies, the consequences and extent of which cannot currently be assessed with certainty, but which may also have negative political and economic effects beyond the United States.

 

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The Linde Group may experience numerous economic challenges in the short to mid-term. The uncertainty regarding the future economic, foreign and security stance taken by the United States as well as the effects of new policies, e.g., regarding foreign trade, especially the current situation with additional tariffs being imposed by countries all over the world, could unsettle the global economy and the financial markets. For example, the recent imposition of trade tariffs and international threats of other restrictions, in particular among the United States, China and the European Union, may create an unstable global economic environment and may trigger further retaliatory actions among foreign governments, potentially resulting in a “trade war”. The occurrence of a “trade war” or other trade-related governmental action has the potential to adversely impact demand for The Linde Group’s products, its costs, its customers, suppliers, and the economy, which in turn could have a material adverse impact on The Linde Group’s operations and financial performance. This also includes, among other things, the future monetary policy pursued by the U.S. Federal Reserve System (the “Federal Reserve”), as well as its impact on the currencies and economies of the emerging markets. Following the rate increases implemented by the Federal Reserve since 2016 and the further interest increases forecast by the Federal Reserve for the end of 2018, it is not yet clear whether or not, and to what extent, central banks in other countries will also raise their interest rates in order to prevent large scale capital outflows. Interest rate policy measures could put the economies of certain countries under pressure and result in increased volatility on the financial markets, with a potential negative impact on the global economy.

The uncertainty surrounding the political environment in Europe and North America could, among other things, pose a threat to the general investment climate and impair growth prospects. The effects on global economic growth of the general low interest rate levels, relatively low oil prices and expansive fiscal policies could fuel further uncertainty regarding structural reforms.

The risk of a more pronounced growth slowdown than expected on the Asian and other high-growth markets, the risk of a significant cooling off of the economy in China as well as the possibility of a continued weak economic environment in the South Pacific region, could have a negative impact on the global economy, as well as on the industries that The Linde Group serves and its business.

Further economic risks could arise from the uncertain political development of the world’s geopolitical crisis spots. In particular, the global increase in the risk of terrorism could prompt short-term economic contractions. Weaker growth rates in up-and-coming markets such as India and China, coupled with political instability in the Middle East and Africa, are among the key factors behind the ongoing weak demand in the plant construction sector affecting The Linde Group’s engineering division (“Linde Engineering Division”). In addition, the uncertain political and economic situation in Brazil and other emerging markets has had, and may continue to have, a material negative impact on the economic climate in their respective regions and may have negative spill-over effects in neighboring countries and regions.

Should the global economy weaken significantly, there would be the threat of lost sales, a potential lack of new business, for example due to an ensuing reluctance to invest, and an increase in the risk of bad debts in the operating business due to the increasing inability of customers to make payments.

In its function as the parent company of The Linde Group, Linde AG holds investments in group companies. The carrying amounts of these investments run the risk of a diminution in value should the economic situation or exchange rates of these group companies deteriorate. This scenario might have an adverse impact on the net income of Linde AG.

The Linde Group has a dual focus on its gases business and on its engineering project business (plant construction). These two businesses, and their different product areas and plant types, respectively, may be affected differently in terms of revenue and earnings when there are changes in certain economic conditions. In particular, the engineering project business, which is cyclical in nature, may be materially impacted by a short-term decline of commodity prices (including oil and natural gas prices) or general economic conditions, which typically have a more direct effect on the willingness of its customers or potential customers to invest in new plants, the expansion of existing plants or other projects, on which The Linde Group is dependent. Therefore, negative economic or other developments affecting the main industries that The Linde Group addresses may have a negative effect on The Linde Group’s business, financial condition and results of operations.

 

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2.4.2

The inability to effectively compete could adversely impact The Linde Group’s business or results of operations.

The competitive pressure facing The Linde Group is mounting both on markets that offer significant growth potential and on more mature markets. This is being fueled, in particular, by weak growth prospects, excess capacity and the migration of existing industries affecting different areas of The Linde Group’s business. For example, the market for hydrogen and synthesis plants continues to be characterized by intense competitive pressure, due to, among other reasons, a largely saturated market for petrochemicals and an excess supply of basic chemicals. All the markets in which The Linde Group is active are also characterized by a trend towards improvement of cost-effective structures, which in turn would increase competition even further.

Existing or new competitors may develop their current products and technologies further or create alternative ones that are more attractively priced, offer higher quality or are more appealing for other reasons than The Linde Group’s products, for example because The Linde Group’s facilities may not be able to maintain competitiveness or because The Linde Group is not able to adjust fast enough, or at all, to changes in customer requirements and cost pressure. If new or better developed products can be offered at more attractive prices, or if such products are more attractive than The Linde Group’s products for other reasons such as a higher degree of functionality, demand for The Linde Group’s products would fall, which could have a material adverse effect on The Linde Group’s business, financial condition and results of operations.

 

2.4.3

Cost pressure in the healthcare sector could adversely impact The Linde Group’s business or results of operations.

In the healthcare sector, cost pressure and the current trend towards outsourcing by government agencies and health insurance funds have intensified the risk of losing contracts as well as possible defaults on the payments owed by such agencies and funds to The Linde Group. This could cause The Linde Group to miss its planned growth and profitability targets. For example, in the United States, price reductions came into effect at the beginning of 2016 due to government tenders, and these cuts were stepped up further from July 1, 2016. However, some price cuts were subsequently postponed to the beginning of 2017. Such price cuts generally have a negative impact on The Linde Group’s revenue and earnings development. For example, in 2017, revenue in The Linde Group’s healthcare business declined compared to the prior year, mainly due to the impact of such government price cuts, particularly in the United States, which continue to be felt. In addition, further challenges for the healthcare sector arise from the need of ongoing adaption of the business model and of the cost structure due to current and future changes in technologies, digitalization and regulations. Changes in the law, for example with regard to case-based lump sums or outsourcing and tendering processes, could have an adverse effect on the opportunities for developing new business in certain countries. In particular, competitive bidding processes may limit reimbursements that The Linde Group is able to achieve from governments in the healthcare sector. These factors are especially relevant in sales markets in the United States and in Europe. For example, a potential expansion of Medicare’s competitive bidding program in the United States or changes to the bidding or contracting process could limit The Linde Group’s ability to service Medicare beneficiaries in certain geographic markets.

Any materialization of these risks could result in material adverse effects on The Linde Group’s business, financial condition and results of operations.

 

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2.4.4

Risks associated with pricing may adversely impact The Linde Group’s business, financial condition or results of operations.

Risks associated with the setting of prices generally arise in areas where certain cost increases cannot be passed on to the customer. The high level of volatility in energy prices and the price of raw materials mean that there is a risk that targets for revenue and earnings might not be met if the resulting increase in costs is not taken into consideration when contracts are agreed and prices are set, or not taken into consideration in a timely manner. In addition, there is a risk that The Linde Group may lose customers and market share in cases in which it increases its prices to account for increasing costs. Therefore risks associated with the setting of prices could have a significant adverse impact on The Linde Group’s business, financial condition and results of operations.

 

2.4.5

Customer and sales risks associated with the commercialization of new customer projects and existing projects could adversely impact The Linde Group’s business or results of operations.

Customer and sales risks associated with both the commercialization of new customer projects or follow-up projects and existing projects cannot be eliminated, especially in the growth markets. There might be technical or economic reasons on the customer side or in the sales markets which could require changes being made to the project or contract. As a result it may not be possible to produce the quantities originally assumed in the business plan in full or it may only be possible to produce such quantities behind schedule. This might give rise not only to uneconomic production processes, but also to significant adverse variances from budgeted cash flow, thereby jeopardizing the revenue and earnings targets attached to the investment.

In addition, The Linde Group may be required to compensate customers for losses and damages if The Linde Group is unable to manufacture and deliver the agreed products because, for example, it is unable to achieve the required production capacities in time or it winds down its business in certain countries. Such compensations could have a material adverse effect on The Linde Group’s business, financial condition and results of operations.

 

2.4.6

A sustained low oil and natural gas price environment could adversely impact The Linde Group’s business, financial condition or results of operations.

The global economic outlook and the further development of oil and natural gas prices are interrelated. Therefore, any major development of energy prices could adversely affect The Linde Group’s business, financial condition and results of operations. While high prices for oil, natural gas and liquefied natural gas (“LNG”) could cause an overall business recession, sustained low prices for oil, natural gas and LNG, or a drop in such prices, could lead to a general reluctance to invest in the energy sector, particularly in those countries that are heavily reliant on oil or natural gas. This would, in turn, have a negative impact on the providers of capital-intensive goods from the industrialized nations. A prolonged phase of low oil prices would increase the risk of mounting insolvency rates among fracking companies in the United States or state bankruptcies, both of which would have a negative impact on the financial markets and the global economy.

The high oil price levels in the past have contributed to significant investments in The Linde Group’s products, such as large-scale plant manufacturing. However, demand for The Linde Group’s products has been affected by the decline of the oil price combined with the saturation of certain markets that had increased investment activity during periods of higher oil price levels, for example regarding the shale gas business in North America. While oil prices have recovered from prior comparative low levels, a decline in oil prices, or oil price volatility, could have a negative impact on The Linde Group’s Engineering Division and the achievement of its short-term order intake targets. Potential customers in the petrochemical and natural gas processing industry could postpone their investment plans further in a climate of uncertainty. When it comes to integrated gases projects in the energy sector, the reluctance to invest among customers is also a risk that affects The Linde Group’s gases division (the “Linde Gases Division”). Any such reluctance or failure of customers to invest in The Linde Group’s products and services could have a material adverse effect on The Linde Group’s business, financial condition and results of operations.

 

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2.4.7

Increases in the cost of gas, raw materials and energy and/or disruption of The Linde Group’s supply chain could result in lost sales or adversely impact The Linde Group’s business or results of operations. In addition, a mismatch in The Linde Group’s take-or-pay agreements with gases suppliers and long-term procurement strategies, on the one hand, and customer agreements, on the other hand, could result in sales risks and could adversely impact The Linde Group’s financial condition and results.

A key element in the success of The Linde Group’s business is the ready availability of products and services purchased by The Linde Group, which must be of suitable quality, and obtainable in appropriate quantities at prices in line with market conditions. This applies not only to certain gases which The Linde Group does not produce itself, but also to other materials which are dependent on raw materials such as steel, aluminum and brass as well as energy. Increases in the cost of gas, raw materials and energy and/or disruption of The Linde Group’s supply chain could result in lost sales or adversely impact The Linde Group’s business or results of operations.

Furthermore, where take-or-pay agreements have been concluded with gases suppliers and long-term procurement strategies are in place, sales risks might possibly arise for The Linde Group if it has not also entered into corresponding agreements with customers. These procurement contracts often provide that compensation must be paid by The Linde Group if there is a premature termination or if The Linde Group buys less than the quantities originally specified. Such compensations could have a significant adverse impact on The Linde Group’s financial condition and results. Risks may also arise for The Linde Group if long-term procurement contracts are not matched by sales contracts covering a similarly long period.

 

2.4.8

The Linde Group’s manufacturing, construction and other activities may lead to personal injury, environmental or property damage, which may have an adverse impact on The Linde Group’s business or results of operations.

The manufacturing of products and construction of plants by or on behalf of The Linde Group may entail risks associated with the production, filling, storage and transport of raw materials, goods or waste, and the distribution of products and related logistics services. These risks might lead to personal injury, damage to property or environmental damage, which in turn might result in business interruptions, monetary penalties, compensation payments or environmental clean-up costs. The reputation of The Linde Group could also suffer if any such event were to occur.

Despite The Linde Group’s health and safety programs and other safety measures, The Linde Group could incur substantial liability in excess of any applicable insurance that could adversely affect The Linde Group’s results of operations and financial condition.

The Linde Group’s various operating processes are associated with risks which might lead to environmental damage. The Linde Group focuses on reducing emissions and on making continual improvements to its operations to ensure the efficient use of resources, materials and energy. However, the possibility that The Linde Group’s activities might lead to environmental damage or that remediation works might cost more than originally budgeted cannot be ruled out.

 

2.4.9

Production or other business interruptions, including with respect to catastrophic events, may adversely impact The Linde Group’s business or results of operations.

A business interruption at one of The Linde Group’s main plants or at a customer’s on-site plant could adversely affect the business, results of operations and reputation of The Linde Group. This would be particularly true if the interruption to the business were to be caused by an accident which also resulted in personal injury or damage to the environment. Risks also include machinery failure or plant breakdowns, which may lead to capacity bottlenecks.

A risk to The Linde Group’s employees and to the net assets, financial condition and results of operations of The Linde Group is also posed by catastrophic events, natural disasters, pandemics, acts of war and terrorist or other criminal attacks. Any such events may, for example, cause disruptions in the supply chain or the project business of The Linde Group. These risks may also have an indirect impact on The Linde Group if customers or suppliers of The Linde Group are significantly affected by any of them.

 

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2.4.10

Technical quality and other problems in plant construction projects may adversely impact The Linde Group’s business or results of operations.

Complex major plant construction projects pose particular risks. The Linde Group’s Engineering Division handles significant contracts which may be worth several hundred million euros and where construction may take a number of years and involve complex processes.

Typically, The Linde Group’s Engineering Division is involved in the design and construction of turnkey plants. Potential risks may arise as a result of the cost accounting and execution of such complex projects, which are subject to uncertainty. Risks may include unexpected technical problems, supply bottlenecks and quality problems with suppliers of major components, unforeseen developments during on-site assembly and problems with partners or subcontractors. In addition, complex import provisions mean that global material procurement can give rise to significant additional costs due to anti-dumping or countervailing duties. Such risks may cause project delays and cost overruns and could have a material adverse impact on The Linde Group’s business, financial condition or results of operations.

The Linde Group operates technologically complex and interconnected production plants and builds such plants for customers. Any stoppage in, or any technical failure of, such plants could result in serious damage through accidents, loss of production, customers, revenue and reputation, as well as in penalties and liabilities to customers and other persons. Production of The Linde Group’s own plants as well as the assembly of customers’ plants may be affected by loss of suppliers or interruptions in the delivery of raw materials, parts, subassemblies or components.

 

2.4.11

Risks in connection with the products and services offered by The Linde Group may adversely affect The Linde Group’s business or results of operations.

The Linde Group faces risks associated with the products and services it offers, including the risk of product defects or an inadequate level of customer care for services that are provided by The Linde Group, in particular in the healthcare business. In serious cases, such risks may result in potential liability claims (for example, in the case of unsafe products), the loss of customers, the loss of operating permits and/or damage to The Linde Group’s reputation, all of which could have a material adverse effect on The Linde Group’s business and results of operation.

 

2.4.12

Risks related to counterparties, liquidity, interest rate movements and exchange rates may adversely impact The Linde Group’s financial results or cash flows.

Due to its global operations, The Linde Group is exposed to a number of financial risks. In particular, these include credit risks, counterparty risks, liquidity risks and risks arising from fluctuations in interest rates and exchange rates. Interest rate risks arise as a result of fluctuations in interest rates caused by the markets. These fluctuations affect both the interest expense borne by The Linde Group and the fair values of financial instruments. In the case of exchange rate risks, there are operational transaction risks, which are the result, for example, of supply contracts for individual projects spread across different currency zones, and translation risks, which arise from currency translation of the financial statements of subsidiaries where those subsidiaries have a functional currency other than The Linde Group’s reporting currency. The main currencies for which such risks exist within The Linde Group are the US dollar, the British pound sterling and the Australian dollar, as well as some Eastern European, South American and Asian currencies. Counterparty risks arise where one or more counterparties (for example, customers) are unable to perform their contractual obligations, including paying amounts owed to The Linde Group in full and on time. Experience during the past economic crises has shown that credit standings can change quickly. It is therefore possible that, despite The Linde Group’s monitoring process, counterparties might delay payments or fail to make them at all. For example, in the past few years, The Linde Group has experienced counterparty insolvency in the U.K. steel sector. Any materialization of counterparty risks may lead to bad debts owed to The Linde Group and the inability to collect outstanding receivables. Any of these financial risks may have a material adverse effect on The Linde Group’s business, financial results or cash flows.

 

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2.4.13

Risks related to pension scheme commitments may adversely impact The Linde Group’s financial results or cash flows.

In many countries, including Germany, the United Kingdom and the United States, companies within The Linde Group have defined benefit commitments to their employees under occupational pension schemes. Depending on the structure of the schemes, one-off payments may be made or the employees may be entitled to a pension for life with an annual increase which may be variable or inflation-linked. As a result, The Linde Group is exposed to risks arising from unexpectedly high rates of inflation or increases in life expectancy.

The amount of the obligation is the actuarial present value of all pension commitments and is expressed as the defined benefit obligation under IFRS. The amount of the obligation is subject to annual changes in the valuation assumptions, including not only factors such as mortality and disability, but especially those relating to the discount rate and other factors that depend on the economic situation in a particular country, including the rate of inflation. This gives rise to interest rate risks and inflation risks.

In most pension schemes, the obligation is covered by assets which are maintained separately. The worth of the pension assets is subject to fluctuations in the fair value of those assets: for example, bonds and shares. Therefore, The Linde Group is exposed to market risks, especially interest rate risks, spread risks and equity risks.

The risks relating to pension obligations on the one hand and to pension assets on the other hand, and therefore to the net funding position of pensions, are quantified and evaluated on a regular basis by The Linde Group. There is a natural conflict between a significant reduction of the risk and the achievement in the long term of the return on assets required to keep pace with the potential increase in the obligation.

An inadequate future investment performance of pension assets or adverse changes in assumptions associated with The Linde Group’s pension schemes could have a material adverse effect on its financial results or cash flows.

 

2.4.14

The Linde Group’s operations are subject to changes in the political, legal and social environment, including sanctions, which may adversely impact its business or results of operations.

The Linde Group’s business is exposed to economic, political and legal risks due to the international nature of its business. Some of the countries in which The Linde Group manufactures or offers services or into which it exports are subject to reduced economic, political, social and legal stability.

The Linde Group’s business is also exposed to such risks due to the general political and legal environment arising from applicable international economic sanctions regimes and changes to such regimes. The Linde Group cannot assure that current or future regulations or developments related to economic sanctions will not have a negative impact on its business, results of operations or reputation, in particular resulting from potential future changes in restrictive measures that the United States may adopt with respect to Russia.

Potential future economic sanctions imposed on parties doing business with certain Russian parties by the U.S. government may in particular have a substantial impact on The Linde Group’s business in Russia, leading to (i) delays or cancellations of the implementation or execution of existing projects and (ii) negative effects on developing potential new business of The Linde Group.

Furthermore, governments may adopt or impose economic sanctions in respect of certain other countries in which The Linde Group operates, which could have an adverse impact on existing business relations or investment plans that are in place even before such sanctions come into force.

 

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In general, a fundamental risk for The Linde Group is posed by potential radical changes in the political, legal and social environment. Potential risks that The Linde Group as a global corporation might encounter in different countries include the nationalization or expropriation of assets, legal risks, the prohibition of capital transfers, bad debts with government institutions, war, terrorist attacks and other unrest. For example, The Linde Group is exposed to country-related risks due to ongoing political instability in Venezuela. Political unrest and wars may also be the cause of indirect risks (economic risks, project risks and risks associated with commercialization). There could also be an indirect negative impact on The Linde Group companies in other countries and in other markets if customers were to change their investment or business plans as a result of the relevant political unrest.

 

2.4.15

Risks arising from the acquisition and sale of companies as well as the entry into or exit from joint ventures may adversely impact The Linde Group’s business or results of operations.

The Linde Group is exposed to risks in connection with the acquisition and sale of companies, products, and technologies as well as risks in connection with the entry into or exit from joint ventures, in addition to the proposed Business Combination. The Linde Group has completed a variety of such transactions in the past, which are associated with complex risks, and The Linde Group expects to continue to carry out such acquisitions and sales and entering into joint ventures in the future. The corresponding risks include delays and challenges that could arise in the process of integrating the acquired companies into The Linde Group or due to an inadequate review of business and other risks in the context of the acquisition of a company or in the context of a joint venture. In addition, there is the risk that The Linde Group’s profitability might be reduced because of successful claims made against The Linde Group relating to representations and warranties given in the course of the sale of a company or contractual arrangements in the context of a joint venture, or relating to known or unknown liabilities of any divested business for which The Linde Group may be held responsible during or after a divestiture.

Furthermore, there can be no assurance that The Linde Group will be able to identify suitable targets or complete acquisitions or enter into joint ventures on favorable terms or at all, find buyers for the businesses it intends to divest or achieve the expected proceeds from a divestiture.

Acquisitions carry many additional risks. These include, among others, that:

 

   

It may not be possible to successfully integrate the acquired business, including its administrative functions such as accounting and human resources.

 

   

It may not be possible to integrate the acquired technologies or products with current products and technologies.

 

   

It may not be possible to retain key personnel of the acquired business.

 

   

The purchaser may assume material unknown liabilities of acquired companies, including legal or intellectual property contingencies or other significant risks that may not have been detected by the due diligence process.

 

   

It may be difficult to implement, restore, or maintain internal controls, procedures, and policies.

In addition, acquisitions and joint ventures may be capital intensive and tie up valuable management resources. It is also possible that not all material risks in connection with the establishment of joint ventures will be identified in the due diligence processes or that any such risks will be identified or sufficiently taken into account in the decision-making process or the respective agreements. Furthermore, in joint ventures or other co-operations and partnerships, The Linde Group has only limited influence on the organization and business success of the entities concerned. Thus, The Linde Group’s ability to exploit the strategic potential of such joint ventures, co-operations and partnerships may be impaired if The Linde Group were unable to agree with its partners on a common strategy and its implementation. The interests of The Linde Group’s partners may also conflict with The Linde Group’s interests and The Linde Group may be prevented, for example due to the governance structure and rights allocation within the joint venture and the applicable partnership agreements, from achieving its own goals. Moreover, the acquired businesses or joint venture entities might not perform as anticipated, due to technical or other difficulties or changing framework conditions. In such cases, The Linde Group may be forced in the future to recognize impairment losses on assets acquired or the goodwill of the cash-generating unit(s) to which the goodwill resulting from the applicable acquisition was allocated to, or on the participation relating to a joint venture entity. Such underperformance or any technical or other difficulties may have a negative effect on The Linde Group’s financial condition and cash flows, resulting in less than expected revenues and potentially requiring The Linde Group to contribute additional, unexpected funds to enable the continued operations of the joint venture or to service financial or other debts of the joint venture entity. Any such conflicts may also give rise to claims, which can be costly and time consuming and have a negative effect on the future performance of the joint venture. Further, The Linde Group is exposed to risks associated with the business of the acquired businesses, some of which The Linde Group may not presently be aware of; and The Linde Group might not have indemnification claims against the sellers or former shareholders of the acquired business for any such risks.

 

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2.4.16

The Linde Group may fail to recognize growth opportunities or realize expected benefits of strategic initiatives, including efficiency programs.

The Linde Group’s long-term growth targets are based on, among other things, the growth areas of energy, the environment and healthcare, as well as on dynamic trends in fast-growing economies.

Failure to identify growth opportunities and execute productivity improvements may limit increases in profitability and may have a material adverse effect on The Linde Group’s market and financial position. These risks can materialize from inadequate processes or a lack of resources to identify opportunities and exploit them. In addition, risks arise from the uncertainty about the future evolution of areas identified as having growth potential, which are influenced by political, social, legal and economic factors.

There are also risks associated with the internal measures adopted by The Linde Group to achieve its targets. These include not only strategic acquisition and investment projects (for example, relating to the expansion of the product portfolio), but also strategic initiatives in areas such as digital transformation and other innovation-driven fields, improving customer satisfaction and sustainability performance. The risks associated with such projects are principally the result of the uncertainty attached to assumptions about the future development of the underlying business model and to the amount of the net investment in an acquisition project or the net cash inflow from an investment project. The Linde Group may fail to execute or achieve anticipated outcomes of its strategic initiatives, which may affect how the market perceives The Linde Group and could impede its growth and profitability.

Overexposure to a single region, customer segment or a particular technology might, for example, have an adverse impact on The Linde Group’s net assets, financial position and results of operations and on its future growth prospects if the assumed overall circumstances change, for example, in a situation where economic conditions worsen or customers fail to extend their contracts.

In addition, in recent years The Linde Group launched two major programs to enhance efficiency. At the end of 2014, the Focus program was introduced, which includes measures to increase efficiency (for example, organizational adjustments in central functions and certain restructuring measures in Australia, South Africa and South America). In the three-year period from 2015 to 2017, this program aimed at reducing costs by up to €180 million per year, mainly related to the reduction of personnel costs. In 2017 and 2016, net cost savings of approximately €160 million and approximately €100 million, respectively, were achieved. The Focus program is expected to continue producing savings of up to €180 million per year in the future. The group-wide efficiency program LIFT (“LIFT”), launched in the autumn of 2016, includes measures to further optimize The Linde Group’s portfolio, review and streamline the range of products and services offered as well as regional activities, for example by withdrawing from unattractive regional markets, further strengthening regional responsibilities, and investing in digital distribution channels. LIFT is also designed to run for a period of three years and aims to generate planned savings of around €370 million per year from 2019 onwards. Thus, as of 2019, the two programs LIFT and Focus combined are planned to result in savings of around €550 million per year. The implementation of these programs is also associated with expenses; for example, in 2016 and 2017, expenses of €116 million and €280 million, respectively, were incurred in regard to LIFT and recorded in The Linde Group’s financial statements as special items. For further information on the Focus program and LIFT, see “17.1.2.4 Restructuring Costs/Special Items”. The Linde Group may also implement further efficiency improvement and cost saving initiatives in the future. The Linde Group has incurred, and may continue to incur further substantial restructuring costs and cash-outs, including severance payments and capital expenditures. If historical costs and expenses, including those that The Linde Group will continue to incur as part of its efficiency improvement measures, are not offset to a sufficient degree by future savings, The Linde Group’s financial position may be adversely affected. Expected efficiency improvements and cost savings are based on certain assumptions and estimates and are therefore subject to uncertainties. There can also be no assurance that these initiatives will bring about the targeted cost savings, efficiencies and the expected increase in The Linde Group’s business potential and earnings.

 

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Any failure to timely implement efficiency improvements and cost savings measures, or the realization of any of the aforementioned risks during or after the implementation, may have a material adverse effect on The Linde Group’s business, results of operations, financial position, cash flows and prospects.

 

2.4.17

The Linde Group might be subject to IT failures, network or system interruptions, data loss and breaches in data security.

Many processes in The Linde Group’s organization are dependent on the reliability of the IT infrastructure, software applications and data. Therefore, breakdowns or interruptions in the relevant systems or data loss generally have a negative impact on business or production processes. Longer-term shutdowns or critical data loss could adversely affect the net assets, financial position and results of operations of The Linde Group. Breaches of data protection rules, unauthorized data retrieval or the loss of personal data or sensitive corporate data might result in compensation claims, penalty charges, competitive losses and long-term damage to reputation and a loss of confidence in The Linde Group.

IT failures, network or system interruptions, data loss, breaches in data security (including in light of the new EU General Data Protection Regulation) or any other IT failure may adversely impact the company’s business and results of operations.

 

2.4.18

Risks related to the development of, or the access to, technology may adversely impact The Linde Group’s business or results of operations.

The Linde Group’s success is dependent in part on its continued investment in technologies to develop new products and services across all businesses, new applications for existing products or to design effective means for producing industrial gases, as well as new business models (i.e., the way in which The Linde Group will do business with its customers in the future, and how new technologies such as digitalization can be integrated). Innovative projects differ from normal capital expenditure projects because of their novelty. Generally, the more innovative the project, the greater the risks attached to it. Despite the opportunities for growth which may be presented by the activities of The Linde Group’s research departments, there is a risk that, due to the high level of complexity of the technologies and markets and the fast rate of change associated with them, projects might be postponed, or might not be able to proceed for technological, economic, legal or safety reasons. In addition, the marketing of innovations, for example in the field of hydrogen technologies, may depend on compliance with standards that are still being shaped or which may change in the future, requiring The Linde Group to adapt its products and services to newer standards. The collaboration with research and development partners can give rise to additional risks to the projects’ success, for example, the risk that a partner becomes insolvent. On the other hand, there is also the risk that competitors might develop new technologies faster or in a more sustainable manner than The Linde Group and then launch those onto the market and through this present a threat to The Linde Group’s core technologies. Failure to access or develop technology or anticipate, manage or adopt technological changes in operations or product applications on a timely basis could have a material impact on The Linde Group’s future business and results of operations.

 

2.4.19

The inability to attract or retain qualified personnel may adversely impact The Linde Group’s business or results of operations.

The Linde Group’s success is dependent on its highly skilled, experienced and efficient workforce. The inability to attract and hire qualified, committed and motivated individuals or the loss of key employees in skilled areas could have, in particular against the backdrop of the ever-increasing shortage of skilled personnel and fierce competition for such employees in the labor market, in particular in Asia, a negative effect on The Linde Group’s business or results of operations. Furthermore, the volatile and demanding market environment requires The Linde Group to be able to make constant improvements in its processes and adapt its organizational structure to keep up with rapidly changing industry requirements. It cannot be excluded that some employees may not be ready and willing to embrace change, which could be disruptive for The Linde Group’s business.

 

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2.4.20

Potential labor union disputes may adversely impact The Linde Group’s business or results of operations.

A portion of The Linde Group’s employees are covered by various national collective bargaining agreements, which set minimum standards for employment. A prolonged failure of unions to renew or renegotiate a collective bargaining agreement could result in industrial action or other labor unrest that is outside of The Linde Group’s control.

This could disrupt The Linde Group’s business and may result in a breach of service parameters or contracts. If not resolved in a timely and cost-effective manner, such industrial action or other labor unrest could prevent or hinder The Linde Group’s operations from being carried out normally. Furthermore, the volatile and demanding market environment requires Linde to be able to make constant improvements in its processes and adapt its organizational structure to keep up with rapidly changing industry requirements. It cannot be excluded that some employees may not be ready and willing to embrace change, which could be disruptive for The Linde Group’s business. Any of the above factors could have a material adverse effect on The Linde Group’s business and results of operations.

 

2.5

Risks Relating to the Regulatory Environment and Legal Risks

 

2.5.1

Praxair and The Linde Group are, and the Combined Group will be, subject to a variety of international government regulations. Changes in these regulations could have an adverse impact on the business, financial position and results of operations.

Praxair and The Linde Group are, and the Combined Group will be, subject to regulations in the following areas, among others:

 

   

environmental protection, including climate change;

 

   

domestic and international tax laws and currency controls;

 

   

safety;

 

   

securities laws applicable in the United States, the European Union, Germany, Ireland, and other jurisdictions;

 

   

trade and import/export restrictions, as well as economic sanctions laws;

 

   

antitrust matters;

 

   

data protection;

 

   

global anti-bribery laws, including the U.S. Foreign Corrupt Practices Act; and

 

   

healthcare regulations.

Changes in these or other regulatory areas, such as evolving environmental legislation in China, may impact Praxair’s, The Linde Group’s and the Combined Group’s profitability and may give rise to new or increased compliance risks: it may become more complex and costly to ensure compliance, and the level of sanctions in the event of non-compliance may rise. Such changes may also restrict Praxair and The Linde Group’s ability to compete effectively in the marketplace. Noncompliance with such laws and regulations could result in penalties or sanctions, cancellation of marketing rights or restrictions on participation in, or even exclusion from, public tender proceedings, all of which could have an adverse impact on Praxair’s and The Linde Group’s financial results and/or reputation.

 

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Praxair and The Linde Group are subject to various environmental and occupational health and safety laws and regulations, including those governing the discharge of pollutants into the air or water, the storage, handling and disposal of chemicals, hazardous substances and wastes, the remediation of contamination, the regulation of greenhouse gas emissions, and other potential climate change initiatives. For example, climate change and energy efficiency laws and policies are being widely introduced in jurisdictions throughout South America, Mexico and parts of Asia. China has announced plans to launch a national carbon emissions trading system. Among other impacts, such regulations are expected to raise the costs of energy, which is a significant cost for Praxair and The Linde Group. Furthermore, violations of these laws could result in substantial penalties, third-party claims for property damage or personal injury, or sanctions. Particularly in the healthcare product area, which is largely state-regulated, regulatory changes could have material adverse effects on the companies’ profitability or on the opportunities for developing new business. Other examples are the design of the EU emissions trading system, including the additional administrative burdens and costs related thereto, and the extra burden being placed on energy-intensive industrial gases production by the increase in electricity prices as a result of additional statutory levies, as well as the implementation of the EU General Data Protection Regulation, which applies directly in all EU member states since May 25, 2018. Praxair and The Linde Group may also be subject to liability for the investigation and remediation of environmental contamination at properties that they own or operate and at other properties where they or their predecessors have operated or arranged for the disposal of hazardous wastes.

In addition, Praxair and The Linde Group are affected by measures being taken to regulate the international financial markets. In a variety of jurisdictions, Praxair and The Linde Group must comply with comprehensive rules and reporting requirements when processing financial transactions. Breaches of these rules and requirements may incur significant penalties from the relevant supervisory authorities. Examples are the Dodd Frank Act in the United States and the EU Market Infrastructure Regulation (“EMIR”) in Europe. EMIR sets, among others, clearing obligations for certain standardized over-the-counter derivative contracts, requires risk mitigation techniques for non-standard over-the-counter derivatives (i.e., portfolio reconciliation and dispute resolution, timely deal confirmation and portfolio compression) and introduced an obligation to report all trades in defined instruments to trade repositories. German law requires annual auditing and certification of The Linde Group’s EMIR compliance by an auditor. Non-compliance with EMIR obligations may be subject to fines and be made public by BaFin.

Praxair and The Linde Group are subject to a particularly extensive legal and regulatory framework, including numerous laws aiming at preventing fraud and abuse in marketing, billing, documenting and record keeping, and an expanded regulatory oversight. A greater degree of regulatory scrutiny, together with an extensive legal and regulatory framework, increases the risks that the relevant operations will fail to comply with the applicable laws and regulations and be exposed to civil and criminal liability. This could have a material adverse effect on the cash flows and the financial condition and results of operations of Linde plc, Praxair and The Linde Group.

 

2.5.2

The outcome of litigation or governmental investigations may adversely impact the Combined Group’s business or results of operations.

With their international operations, The Linde Group and Praxair are exposed to numerous legal risks. These may include, in particular, risks relating to claims or governmental investigations relating to product liability, competition and antitrust law, export control, customs regulations, labor law, data protection, supply contracts, engineering projects, procurement, patent law, tax legislation, healthcare regulations and environmental protection, among others. Praxair, Inc. and certain of its subsidiaries (see “12.14 Legal Proceedings”) as well as certain companies in The Linde Group (see “5.5 Litigation Related to the Business Combination” and “15.11 Legal Proceedings”) are party to various lawsuits and governmental investigations arising in the ordinary course of business. Adverse outcomes in some or all of the claims pending may result in significant monetary damages or injunctive relief that could adversely affect the Linde plc Group’s, Praxair’s and The Linde Group’s ability to conduct business. The litigation and other claims Praxair and The Linde Group face are subject to inherent uncertainties. Legal or regulatory judgments or agreed settlements might give rise to expenses which are not covered, or are not fully covered, by insurance benefits and may also lead to negative publicity and reputational damage. An unfavorable outcome or determination could cause a material adverse impact on the Combined Group’s results of operations.

 

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2.5.3

Praxair and The Linde Group are, and the Combined Group will be, subject to anti-corruption laws in the jurisdictions in which they operate, as well as trade compliance and economic sanctions laws and regulations. A failure to comply with these laws and regulations may subject the companies to civil and criminal penalties, harm their reputation and materially adversely impact their respective businesses or results of operations.

Doing business globally requires Praxair and The Linde Group to comply with the laws and regulations of numerous jurisdictions, placing restrictions on operations and business practices. Certain laws and regulations, such as those related to anti-corruption, trade and compliance and economic sanctions, require Praxair and The Linde Group to implement policies and procedures designed to ensure that Praxair and The Linde Group, their employees and other intermediaries comply with the applicable restrictions. These restrictions include prohibitions on the sale or supply of certain products, services and any other economic resources to embargoed or sanctioned countries, governments, persons and entities. Compliance with these restrictions requires, among other things, screening of business partners. Praxair currently conducts operations in Russia and The Linde Group currently conducts operations in Russia and Iran (although the number of customer agreements and related obligations in Iran is tapering off), in each case, in accordance with economic sanctions laws as applicable to Praxair or The Linde Group, respectively, as of the date of this Prospectus. Despite the companies’ commitment to legal compliance and corporate ethics, neither can ensure that its policies and procedures will always protect it from intentional, reckless or negligent acts committed by employees or agents under the applicable laws. In addition, such restrictions on operations and business practices as well as required procedures may become more stringent or cumbersome in the future, including as a result of changes in applicable laws and regulations. Furthermore, as a result of the Business Combination and the transaction structure, Praxair and The Linde Group may become subject to additional laws and regulations that, among other things, may place further restrictions on the companies’ operations and business practices, and may lead to the Combined Group losing existing business or limiting its ability to generate new business, which could have an adverse effect on their respective operations in these or other countries, and may result in certain categories of investors divesting Linde plc securities, which could in turn have an adverse effect on the prices of Linde plc’s securities. Violations of anti-corruption laws, export control laws and regulations, and economic sanctions laws and regulations are punishable by civil penalties, including fines and debarment from government contracts, as well as criminal fines and imprisonment. If Praxair or The Linde Group fails to comply with laws governing the conduct of international operations, Praxair or The Linde Group may be subject to criminal and civil penalties and other remedial measures, which could materially adversely affect its reputation, business and results of operations.

 

2.5.4

Potential product defects or inadequate customer care may adversely impact Praxair’s, The Linde Group’s and the Combined Group’s business or results of operations.

Risks associated with products and services may result in potential liability claims, the loss of customers or damage to Praxair’s, The Linde Group’s and the Combined Group’s reputation. Principal possible causes of risks associated with products and services are product defects or an inadequate level of customer care when Praxair and The Linde Group are, and the Combined Group will be, providing services.

Praxair and The Linde Group are, and the Combined Group will be, exposed to legal risks relating to product liability in the countries where they operate, including countries such as the United States, where legal risks — in particular legal risks stemming from class action product liability — have historically been more significant than in other countries. The outcome of any pending or future products and services proceedings or investigations cannot be predicted and legal or regulatory judgments or agreed settlements may give rise to significant losses, costs and expenses.

The manufacturing and sale of products as well as the construction of plants by Praxair, The Linde Group and the Combined Group may give rise to risks associated with the production, filling, storage, handling and transport of raw materials, goods or waste. Industrial gases are potentially hazardous substances and medical gases and the related healthcare services must comply with the relevant specifications in order to not adversely affect the health of patients treated with them.

 

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These products and services, if not handled or performed appropriately, might lead to personal injuries, business interruptions, environmental damages or other significant damages, which may result in a number of negative consequences, including:

 

   

liability payments, losses, monetary penalties or compensation payments;

 

   

environmental clean-up costs or other costs and expenses;

 

   

exclusion from certain market sectors deemed important for future development of the business; and

 

   

loss of reputation.

In addition, neither Praxair nor The Linde Group, nor the Combined Group can exclude the possibility of any product defects or inadequate provision of services. Risks associated with products and services may result in negative consequences such as potential liability claims, contracts failing to be extended, contractual penalties, inclusion in lists of prohibited counterparties and damage to the companies’ reputation. Such consequences may have a material adverse effect on Praxair’s, The Linde Group’s and the Combined Group’s respective businesses and results of operations.

 

2.5.5

Any claims beyond Praxair’s, The Linde Group’s or the Combined Group’s insurance coverage limits, or that are otherwise not covered by Praxair’s, The Linde Group’s or the Combined Group’s insurance, may result in substantial costs, a reduction in its available capital resources and may have an adverse impact on Praxair’s, The Linde Group’s or the Combined Group’s financial results or cash flows.

Praxair and The Linde Group carry, and the Combined Group will carry, various forms of business and liability insurance in types and amounts believed reasonable and customary for similarly situated companies in the industry. However, Praxair and The Linde Group are not, and the Combined Group will not be, able to have insurance coverage for all of the risks and liabilities assumed in connection with their respective businesses, including product liability, breakdown of machinery, damages to buildings and other assets, injuries to employees, customers or vendors and environmental contamination. In addition, insurance policies generally have deductibles or limits that reduce the amount of Praxair’s, The Linde Group’s and the Combined Group’s potential recoveries from insurance. As a result, not all of the companies’ potential business losses are covered under their respective insurance policies. Should Praxair, The Linde Group or the Combined Group sustain a significant uncovered loss, this could reduce their respective net income or result in a net loss. Additionally, if one or more insurance counterparties were to fail, Praxair, The Linde Group or the Combined Group would bear the entire amount of an otherwise insured loss. As a result, any claims beyond Praxair’s, The Linde Group’s or the Combined Group’s insurance coverage limits or that are otherwise not covered by their insurance or are made against non-solvent parties may have a material adverse effect on the companies’ financial results or cash flows.

 

2.5.6

Praxair, The Linde Group and the Combined Group may not be successful in protecting their intellectual property rights or in avoiding infringement claims relating to intellectual property rights of third parties.

Praxair and The Linde Group own a large number of patents and other intellectual property. While there is a presumption that patents are valid, the granting of a patent does not necessarily imply that they are effective or that potential patent claims can be enforced to the degree required or desired. In addition, Praxair and The Linde Group cannot guarantee that all the patents they have applied for or planned in connection with new technological developments will be granted in each of the countries where they consider this necessary or desirable. Also, the possibility that third parties may infringe Praxair’s or The Linde Group’s patents and/or other intellectual property rights and that the companies, for legal or factual reasons, might be unable to halt such infringements, cannot be excluded.

In addition, non-confidential know-how and industrial secrets that are not patented or cannot be patented are of paramount importance in Praxair’s and The Linde Group’s business, in particular in areas with technologically demanding products and production processes.

 

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Should Praxair, The Linde Group or the Combined Group not be able to protect their intellectual property, they may not be able to profit from the advances in technology they have achieved, which could lead to a reduction in their future results of operations. This could affect their respective competitive position and any resulting reduction in revenues would have a material adverse effect on Praxair’s, The Linde Group’s or the Combined Group’s business, financial condition and results of operations.

In addition, Praxair, The Linde Group and the Combined Group cannot exclude the possibility that they infringe or will infringe the patents and other intellectual property rights of third parties. If that were to happen, Praxair, The Linde Group or the Combined Group would be prevented from using the affected technologies in the countries where such intellectual property rights were granted. In such cases, Praxair, The Linde Group or the Combined Group may be prohibited from manufacturing or marketing certain products and may be forced to obtain licenses or make changes to its manufacturing processes. Further, it could be exposed to demands for compensation for infringements. Praxair, The Linde Group and the Combined Group could also be forced to purchase licenses to make use of technology from third parties, which would entail corresponding costs.

If such events occur, they may have a material adverse effect on Praxair’s, The Linde Group’s or the Combined Group’s competitiveness, business, profitability and financial position.

 

2.5.7

U.S. civil liabilities may not be enforceable against Linde plc.

Linde plc is organized under the laws of Ireland and substantial portions of its assets will be located outside of the United States. In addition, certain members of the Linde plc Board of Directors, the Linde AG Supervisory Board and the Praxair Board of Directors, and certain members of the Linde AG Executive Board and officers of Linde AG and Linde plc, the Listing Agent as well as Linde plc’s and Linde AG’s auditors, reside outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon Linde plc, Linde AG or such other persons residing outside the United States, or to enforce outside the United States judgments obtained against such persons in U.S. courts in any action, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, rights predicated upon the U.S. federal securities laws.

A judgment for the payment of money rendered by a court in the United States based on civil liability would not be automatically enforceable in Ireland. There is no treaty between Ireland and the United States providing for the reciprocal enforcement of foreign judgments. The following requirements must be met before the foreign judgment will be deemed to be enforceable in Ireland:

 

  (i)

the judgment must be for a definite sum;

 

  (ii)

the judgment must be final and conclusive; and

 

  (iii)

the judgment must be provided by a court of competent jurisdiction.

An Irish court will also exercise its right to refuse judgment if the foreign judgment (a) was obtained by fraud; (b) violated Irish public policy; (c) is in breach of natural justice; or (d) if the judgment is irreconcilable with an earlier foreign judgment.

Based on the foregoing, there can be no assurance that Linde plc Shareholders based in the United States will be able to enforce against Linde plc, any member of the Linde plc Board of Directors, the Linde AG Supervisory Board or Linde AG Executive Board, or the Praxair Board of Directors, or any officer of such companies, the Listing Agent or Linde plc’s or Linde AG’s auditors, any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

In addition, there is doubt as to whether an Irish court would accept jurisdiction and impose civil liability on Linde plc, any member of the Linde plc Board of Directors, the Linde AG Supervisory Board or the Linde AG Executive Board, or the Praxair Board of Directors, or any officer of Linde plc, Praxair, Inc. or Linde AG, the Listing Agent or Linde plc’s or Linde AG’s auditors, in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction in Ireland against Linde plc or such member, officer or expert, respectively.

 

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2.6

Risks Relating to Tax Matters

 

2.6.1

A change in Linde plc’s tax residency could have a negative effect on the Combined Group’s future profitability, and may trigger taxes on dividends or exit charges.

Linde plc intends to continue to manage its affairs so that it has its tax residency only in the United Kingdom. However, we cannot assure you that Linde plc is or will continue to be resident only in the United Kingdom for tax purposes.

Under current Irish legislation, a company incorporated in Ireland is considered Irish tax resident unless it is resident in a territory with which Ireland has a double tax treaty, under the terms of that treaty. A company may also be considered resident for tax purposes in Ireland, if it is centrally managed and controlled in Ireland. Under current U.K. law, a company that is centrally managed and controlled in the United Kingdom is regarded as resident in the United Kingdom for taxation purposes unless it is treated as resident in another jurisdiction pursuant to any appropriate double tax treaty with the United Kingdom. Other jurisdictions may also seek to assert taxing jurisdiction over Linde plc. For example, a company is subject to German taxation on its worldwide income if it has either its registered seat or place of effective management and control in Germany. This is a question of fact and needs to be determined on an overall assessment of the actual circumstances. Where a company is treated as tax resident under the domestic laws of both the United Kingdom and Ireland, article 4(3) of the Double Tax Convention between Ireland and the United Kingdom (the “Residence Tie-Breaker”) currently provides that the company shall be treated as resident only in one of those two jurisdictions if its place of effective management is situated there. A similar situation would exist if Linde plc was treated as a tax resident under the domestic laws of both the United Kingdom and Germany, or of Ireland and Germany.

The Organisation for Economic Co-operation and Development has proposed a number of measures relating to the tax treatment of multinationals, some of which are to be implemented by amending double tax treaties through a multilateral instrument (the “MLI”). The MLI has been signed by a number of countries, including Germany, Ireland and the United Kingdom. The United Kingdom has now also ratified it. The MLI allows signatories to opt into or out of certain changes: the effect for a given double tax convention depends on the options chosen by the two contracting states. Ireland and the United Kingdom indicated that they intended to change the Residence Tie-Breaker so that it would depend on a ruling by the “competent authorities” (that is, the tax authorities) of the two contracting states, instead of an objective application of the place of effective management test. Accordingly, following the United Kingdom’s ratification of the MLI, if Ireland maintains its position and ratifies the MLI on that basis, the Residence Tie-Breaker will be amended to depend on a determination by Irish Revenue Commissioners and HM Revenue and Customs. It is not certain when this will take place nor what factors will be taken into account in making the determination, but Linde plc has no specific reason to expect such a determination to alter its tax residency.

It is possible that in the future, whether as a result of a change in law (including the taking effect of the MLI) or a change to the intention of Germany or Ireland or the practice of any relevant tax authority or as a result of any change in the conduct of Linde plc’s affairs, Linde plc could become, or be regarded as having become, resident in a jurisdiction other than the United Kingdom. If Linde plc ceases to be resident in the United Kingdom and becomes resident in another jurisdiction, it may be subject to United Kingdom exit charges, and could become liable for additional tax charges in the other jurisdiction (including, by way of example, dividend withholding taxes or corporate income tax charges). If Linde plc were to be treated as resident in more than one jurisdiction, it could be subject to multiple taxation. If, for example, Linde plc were considered to be a tax resident of Ireland, Linde plc could become liable for Irish corporation tax and any dividends paid by it could be subject to Irish dividend withholding tax. If Linde plc were to be treated as tax resident in Germany, it would become liable for German corporate income tax on its worldwide income and trade tax on its income allocable to its German business, and dividends paid by Linde plc to its shareholders could be subject to German dividend withholding tax, and such tax may not be fully creditable or refundable under a double tax convention or the domestic rules of a shareholder.

 

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2.6.2

The relevant criteria for Linde plc’s treatment as a foreign corporation for U.S. federal tax purposes may not be met, or the IRS may not agree with the conclusion that Linde plc should be treated as such.

Although Linde plc is incorporated in Ireland, the U.S. Internal Revenue Service (the “IRS”) may assert that Linde plc should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal income tax purposes pursuant to Section 7874 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). Further, changes to Section 7874 of the Code or the U.S. Treasury Regulations promulgated thereunder, or interpretations thereof, could affect Linde plc’s status as a foreign corporation.

For U.S. federal income tax purposes, a corporation is generally considered a U.S. “domestic” corporation (or U.S. tax resident) if it is organized in the United States, and a corporation is generally considered a “foreign” corporation (or non-U.S. tax resident) if it is not a U.S. domestic corporation. Because Linde plc is an entity incorporated in Ireland, it would generally be classified as a foreign corporation (or non-U.S. tax resident) under these rules. However, Code Section 7874 provides an exception under which a foreign incorporated entity may, in certain circumstances, be treated as a U.S. domestic corporation for U.S. federal income tax purposes.

Unless Linde plc has satisfied the substantial business activities exception, as defined in Section 7874 and described in more detail below (the “Substantial Business Activities Exception”), Linde plc would be treated as a U.S. domestic corporation (i.e., as a U.S. tax resident) for U.S. federal income tax purposes under Code Section 7874 if the percentage (by vote or value) of Linde plc Shares considered to be held by former holders of Praxair Shares after the Merger by reason of holding Praxair Shares for purposes of Code Section 7874 (the “Section 7874 Percentage”) is 60% or more (if, as expected, the “Third Country Rule” applies; under the Third Country Rule, if (i) there is an acquisition of a domestic company by a foreign acquiring company in which the Section 7874 Percentage is at least 60% (reduced from the general 80% threshold otherwise applicable under Section 7874 of the Code and the U.S. Treasury Regulations promulgated thereunder), and (ii) in a related acquisition, such foreign acquiring company acquires another foreign corporation and the foreign acquiring company is not subject to tax as a resident in the foreign country in which the acquired foreign corporation was subject to tax as a resident prior to the merger, then the foreign acquiring company will be treated as a U.S. domestic corporation for U.S. federal income tax purposes). In order for Linde plc to satisfy the Substantial Business Activities Exception, at least 25% of the employees (by headcount and compensation), real and tangible assets and gross income of the Linde plc expanded affiliated group must be based, located and derived, respectively, in the country in which Linde plc is a tax resident after the Merger. The Substantial Business Activities Exception is not expected to be satisfied.

The Section 7874 Percentage is currently expected to be less than 60%. However, the calculation of the Section 7874 Percentage is complex, is calculated based on the facts as of the effective time of the Merger, is subject to detailed regulations (the application of which is uncertain in various respects and would be impacted by changes in such regulations) and is subject to factual uncertainties (including fluctuations in the value of Praxair Shares, and therefore in the value of Linde plc Shares, as of the effective time of the Merger). As a result, the IRS could assert that the Section 7874 Percentage is greater than or equal to 60% and that Linde plc therefore is treated for U.S. federal income tax purposes as a U.S. domestic corporation (i.e., as a U.S. tax resident). If the IRS successfully challenged Linde plc’s status as a foreign corporation, significant adverse tax consequences would result for Linde plc, the Combined Group and for certain of Linde plc’s Shareholders. Moreover, any changes in the applicable tax laws or policies could adversely impact the Combined Group’s financial position or results of operations, see “2.6.4 Changes in tax laws or policy could adversely impact the Combined Group’s financial position or results of operations.”

Linde plc is not currently expected to be treated as a domestic corporation for U.S. federal income tax purposes, but it is possible that changes in U.S. federal income tax law could alter that result.

 

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2.6.3

Transfers of Linde plc Shares may be subject to Irish stamp duty.

For the majority of transfers of Linde plc Shares, there will not be any Irish stamp duty. However, Irish stamp duty will become payable in respect of certain share transfers occurring after completion of the Business Combination. A transfer of Linde plc Shares from a seller who holds shares beneficially (i.e. through DTC or Clearstream) to a buyer who holds the acquired shares beneficially will not be subject to Irish stamp duty (unless the transfer involves a change in the nominee that is the record holder of the transferred shares). A transfer of Linde plc Shares by a seller who holds shares directly (i.e. not through DTC or Clearstream) to any buyer, or by a seller who holds the shares beneficially to a buyer who holds the acquired shares directly, may be subject to Irish stamp duty (currently at the rate of 1% of the price paid or the market value of the shares acquired, if higher) payable by the buyer. A shareholder who directly holds shares may transfer those shares into his or her own broker account to be held through DTC/Clearstream (or vice versa) without giving rise to Irish stamp duty provided that the shareholder has confirmed to Linde plc’s transfer agent that there is no change in the ultimate beneficial ownership of the shares as a result of the transfer and the transfer is not in contemplation of a sale of the shares.

Because of the potential Irish stamp duty on transfers of Linde plc Shares, directly registered Praxair Shareholders may face disadvantages if they do not open broker accounts and do not transfer their shares into such accounts as soon as possible, and in any event prior to completion of the Business Combination. Any person who wishes to acquire Linde plc Shares after completion of the Business Combination may face disadvantages if they do not acquire such shares through DTC or Clearstream.

 

2.6.4

Changes in tax laws or policy could adversely impact the Combined Group’s financial position or results of operations.

Linde plc, Praxair and The Linde Group are, and the Combined Group will be, subject to the tax rules and regulations in the U.S., Germany, Ireland, the U.K. and other countries in which Linde plc, Praxair and The Linde Group and their affiliates operate. Such tax rules and regulations are subject to change on a prospective or retroactive basis. Under current economic and political conditions, including the referendum in June 2016 in the U.K. in which voters approved an exit from the EU and the ongoing exit process, tax rates and policies in any jurisdiction, including the U.S., the U.K. and EU, are subject to significant change. In particular, since Linde plc is expected to be treated as U.K. tax resident, any potential changes in the tax rules applying to U.K. tax-resident companies would directly affect Linde plc.

When tax rules change, this may result in a higher tax expense and the need to make higher tax payments. In addition, changes in tax legislation may have a significant impact on Linde plc’s, Praxair’s and The Linde Group’s tax receivables and tax liabilities as well as on their deferred tax assets and deferred tax liabilities. Moreover, uncertainty about the tax environment in some regions may restrict Linde plc’s, Praxair’s or The Linde Group’s opportunities to enforce their respective rights under the law. Companies in the Combined Group will also operate in countries with complex tax regulations which could be interpreted in different ways. Interpretations of these regulations or changes in the tax system might have an adverse impact on the tax liabilities, profitability and business operations of Praxair, The Linde Group or the Combined Group. Linde plc, Praxair, Inc. and Linde AG and their respective subsidiaries are subject to periodic audits by the tax authorities in various jurisdictions or other review actions by the relevant financial or tax authorities. The ultimate tax outcome may differ from the amounts recorded in the Linde plc Group’s, Praxair’s and The Linde Group’s financial statements and may materially affect their respective financial results for the period when such determination is made.

 

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In the current environment, the U.S. Congress, the European Union, the Organisation for Economic Co-operation and Development and other government agencies in jurisdictions where Linde plc and its affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. One area of focus has been “base erosion and profit shifting,” including situations where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. However, the prospect of any reform with respect to these issues remains highly uncertain. Any such changes, among other possible changes in applicable tax rules and regulations, could affect the treatment of the Linde plc Group, Praxair, The Linde Group, or their respective affiliates or shareholders significantly. Additionally, on December 22, 2017, tax reform legislation was enacted in the United States. This legislation made significant changes to the U.S. Internal Revenue Code, which include a reduction in the U.S. corporate income tax rate, the imposition of a “base erosion and anti-abuse tax,” limitations on the deductibility of interest and a tax on “global intangible low-taxed income.” These provisions are highly complex and unclear and there is limited guidance regarding their application. It is possible that the impact from certain of these or other provisions could reduce any benefit received from the reduction in the statutory U.S. corporate income tax rate. The overall impact of this legislation also depends on the future interpretations and regulations that may be issued by U.S. tax authorities, and it is possible that future guidance could adversely impact the Combined Group.

In addition, following a meeting of the Ministers of Finance of the German Federal States (Bundesländer) on June 21, 2018, plans have been announced to reform the German Real Estate Transfer Tax Act, potentially with retroactive effect. Although, there is not yet a formal draft of a revised German Real Estate Transfer Tax Act available, the Ministers of Finance announced their intention to inter alia tighten the rules pursuant to which German real estate transfer tax is triggered upon the sale or transfer of shares in entities owning real estate (the so-calledShare Deal Rule”). According to the announcement, this could include lowering the threshold for triggering German real estate transfer tax under the Share Deal Rule from currently 95% of the share capital or interests in the relevant entity to 90%. Since Linde plc will acquire approximately 92% of Linde AG’s issued share capital upon the consummation of the Exchange Offer and following the consummation of the Exchange Offer intends to transfer all or most of its Linde AG Shares to its subsidiary Linde Holding GmbH and subsequently to its indirect subsidiary Linde Intermediate Holding AG which may be followed by a cash-merger squeeze out, this could result, if the reform is enacted as currently discussed, in German real estate transfer tax becoming due up to four times which could lead to a tax burden in the amount of approximately €20 million to €40 million each time the shares are transferred. Additionally, according to the announcement of the Ministers of Finance, the reform could include a new rule for real estate owning corporations whereby a transfer of 90% or more of the shares to several new shareholders within a period of 10 years triggers German real estate transfer tax. It is not yet clear, however, whether and how such rule would also apply to publicly listed corporations.

 

2.7

Risks Relating to Linde plc Shares

 

2.7.1

There has been no prior public market for Linde plc Shares, and the market price of Linde plc Shares may be volatile.

On August 27, 2018, Linde plc applied for admission of the Linde plc Shares to listing and trading on the New York Stock Exchange (“NYSE”) (trading in U.S. dollars). On October 22, 2018, Linde plc applied for admission of the Linde plc Shares to listing and trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange and the sub-segment thereof with additional post-admission obligations (Prime Standard) (trading in euros). However, so far, Linde plc Shares have no trading history on a public market. It is not expected, but cannot be entirely excluded that an active public market for Linde plc Shares may not develop or be sustained after the completion of the Business Combination. Linde plc cannot predict the extent to which a trading market will develop or how liquid that market might become.

The market price of Linde plc Shares may be volatile. Broad general economic, political, market and industry factors may adversely affect the market price of Linde plc Shares, regardless of the Combined Group’s actual operating performance. Factors that could cause fluctuations in the price of Linde plc Shares may include, among other things:

 

   

actual or anticipated variations in operating results and the results of competitors;

 

   

changes in financial estimates by Linde plc or by any securities analysts that might cover Linde plc Shares;

 

   

conditions or trends in the industry, including regulatory changes;

 

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announcements by Linde plc or its competitors of significant acquisitions, strategic partnerships or divestitures;

 

   

announcements of investigations or regulatory scrutiny of Linde plc’s operations or lawsuits filed against it;

 

   

additions or departures of key personnel; and

 

   

issues or sales of Linde plc Shares, including sales of shares by its directors and officers or its strategic investors.

Linde plc Shareholders may lose parts of or their entire investment, if the market price of Linde plc Shares falls due to one or several of the described factors.

 

2.7.2

Any dividend payment in respect of Linde plc Shares is subject to a number of factors, including the distributions of earnings to Linde plc by its subsidiaries, the financial condition and results of operations of the Combined Group, as well as the distributable reserves of Linde plc.

Although Linde plc currently expects to pay dividends, subject to its ability to do so, any dividend paid or changes to dividend policy are within the discretion of the Linde plc Board of Directors and will depend upon many factors, including distributions of earnings to Linde plc by its subsidiaries, the financial condition and results of operations of the Combined Group, legal requirements, including limitations imposed by Irish law, restrictions in any debt agreements that limit Linde plc’s ability to pay dividends to shareholders, terms and restrictions in any series of preferred shares and other factors the Linde plc Board of Directors deems relevant. Linde plc’s ability to pay dividends is limited under Irish law to the extent it has distributable reserves. Distributable reserves means the accumulated realized profits (so far as not previously utilized by distribution or capitalization), less accumulated realized losses (so far as not previously written off in a reduction or a reorganization of capital duly made). In addition, no distribution or dividend may be made if, at that time, the net assets of Linde plc are not, or would not be after giving effect to such distribution or dividend, equal to, or in excess of, the aggregate of Linde plc’s called-up share capital plus undistributable reserves.

Linde plc’s ability to pay dividends in the future will depend on a number of factors, principally on its ability to receive sufficient dividends from its subsidiaries. As a holding company, Linde plc will conduct substantially all of its operations through its subsidiaries, such entities will generate substantially all of the operating income and cash flow of the Combined Group. The ability of such entities to make dividend payments to Linde plc depends largely on their financial condition and ability to generate profits. In addition, because Linde plc’s subsidiaries are separate and distinct legal entities, they may be restricted by contract, including other financing arrangements, charter provisions, other shareholders or the applicable laws and regulations of the various countries in which they operate from paying any dividends or lending or advancing funds to Linde plc. Additionally, claims of the creditors of Linde plc’s subsidiaries have priority over any claims that Linde plc may have with respect to the assets of its subsidiaries. Further, the ability of Linde plc to direct dividend payments from Linde AG on the basis of an existing domination agreement between Linde Holding GmbH and Linde Intermediate Holding AG and indirect control over Linde AG may be limited during any period prior to the effectiveness of the intended cash-merger squeeze-out. During such period, dividends may only be paid out by Linde AG as determined by resolution of its shareholders at the general meeting of shareholders for the preceding fiscal year. In addition, under German law, upstream loans may only be granted under certain conditions, in particular, if and to the extent that the respective payment is covered by an unimpaired claim to repayment with full value. Any delay in implementing this post-completion reorganization (see “5.6 Cash-Merger Squeeze-Out” for a description) could adversely impact the payment of dividends from Linde AG to Linde plc.

Linde plc will not have distributable reserves immediately following completion of the Business Combination. Until such time as Linde plc creates distributable reserves through dividends from its subsidiaries, the creation of distributable reserves of Linde plc (by reducing its share premium) requires the approval of the Irish High Court. Linde plc is not aware of any reason why the Irish High Court would not approve the creation of distributable reserves, however, the issuance of the required order is a matter for the discretion of the Irish High Court. In the event that distributable reserves of Linde plc are not created in this way, distributions by way of dividends, share repurchases or otherwise will generally not be permitted under Irish law until such time as the Combined Group, as a result of its business activities, has created sufficient distributable reserves in its most recent unconsolidated annual audited financial statements or other financial statements properly prepared in accordance with the Companies Act.

 

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2.7.3

The rights of the Linde plc Shareholders and the responsibilities of members of the Linde plc Board of Directors are governed by Irish law and the Linde plc constitution, which may make it difficult for foreign shareholders to enforce their rights.

Linde plc’s corporate affairs are governed by the Linde plc constitution and the laws governing companies incorporated in Ireland. The rights of Linde plc Shareholders and the responsibilities of members of the Linde plc Board of Directors under the laws of Ireland differ from the rights of shareholders and the responsibilities of a company’s board of directors under the laws of Delaware and the supervisory board and executive board of a company under German law. Linde plc Shareholders outside of Ireland may serve foreign process on Linde plc in accordance with Irish law, but it may be difficult to enforce foreign judgments against Linde plc in Ireland. Irish law significantly limits the circumstances under which shareholders in Irish companies may bring derivative action. In addition, and save as provided for under the European Communities (Cross-Border Mergers) Regulations 2008, as amended, Irish law does not afford appraisal rights to dissenting shareholders in the form typically available to shareholders of a U.S. company or a German company.

 

2.7.4

Linde plc Shareholders could be diluted in the future if Linde plc increases its issued share capital because of the dis-application of statutory preemption rights. In addition, shareholders in certain jurisdictions, including the United States, may not be able to exercise their pre-emption rights even if those rights have not been dis-applied.

As a matter of Irish law, holders of Linde plc Shares will have a pre-emption right with respect to any issuance of Linde plc Shares for cash consideration or the granting of rights to subscribe for Linde plc Shares for cash consideration, unless such pre-emption right is dis-applied, in whole or in part, either in the Linde plc constitution or by resolution of the Linde plc Shareholders at a general meeting of shareholders or otherwise. The Linde plc constitution dis-applies the statutory pre-emption rights to the maximum extent permitted by Irish law, i.e., the Linde plc Board of Directors has discretion to issue up to all of Linde plc’s authorized but unissued share capital on a non pre-emptive basis for cash consideration at any stage during the period of five years from adoption of the Linde plc constitution, which became effective upon the satisfaction of the last outstanding closing condition to the Exchange Offer. In addition, even if Linde plc makes a rights offering of shares to Linde plc Shareholders (e.g., after the dis-application of pre-emption rights contained in the Linde plc constitution has expired), due to laws and regulations in certain jurisdictions outside Ireland, shareholders in such jurisdictions may not be able to exercise their pre-emption rights unless Linde plc takes action to register or otherwise qualify the rights offering under the laws of that jurisdiction. For example, in the United States, U.S. holders of Linde plc Shares may not be able to exercise pre-emption rights unless a registration statement under the Securities Act is declared effective with respect to the Linde plc Shares issuable upon exercise of such rights or an exemption from the U.S. registration requirements is available. If Linde plc Shareholders in such jurisdictions are unable to exercise their pre-emption rights, their ownership interest in Linde plc would be diluted. Any future issuance of Linde plc Shares or debt instruments convertible into Linde plc Shares where pre-emption rights of Linde plc Shareholders are not available or are excluded would result in the dilution of existing Linde plc Shareholders and reduce the earnings per Linde plc Share, which could have a material adverse effect on the price of Linde plc Shares.

 

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PART III

IMPORTANT INFORMATION

 

3.1

Forward-Looking Statements

Certain statements and assumptions in this Prospectus contain or are based on “forward-looking” information. Forward-looking statements are based on Praxair, Inc.’s, Linde AG’s or Linde plc’s beliefs and assumptions on the basis of factors currently known to them. These forward-looking statements include terms and phrases such as: “anticipate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” and similar expressions. These forward-looking statements include statements regarding benefits of the proposed Business Combination, integration plans and expected synergies and cost reductions, anticipated future growth, financial and operating performance and results. Forward-looking statements involve significant risks and uncertainties that may cause actual results to be materially different from the results predicted or expected. No assurance can be given that these forward-looking statements will prove accurate and correct, or that projected or anticipated future results will be achieved. All forward-looking statements included in this Prospectus are based upon information available to Praxair, The Linde Group and the Linde plc Group on the date hereof, and each of Linde plc, Praxair, Inc. and Linde AG disclaims and does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than Praxair, Inc., Linde AG or Linde plc has described. All such factors are difficult to predict and beyond Praxair’s, The Linde Group’s or Linde plc’s control. These factors include, among others:

 

   

failure to obtain applicable governmental or regulatory approvals in a timely manner or otherwise, or being required to accept conditions, including divestitures, that could reduce the anticipated benefits of the proposed Business Combination as a condition to obtaining regulatory approvals;

 

   

the ability to implement the Business Combination;

 

   

the ability to integrate the operations of Praxair and The Linde Group, the ultimate outcome of the commercial and operating strategy of the Combined Group, including the ultimate ability to realize synergies and cost reductions;

 

   

operating costs, customer loss or business disruption being greater than expected in anticipation of, or, if consummated, following, the Business Combination;

 

   

the effects of a combination of Praxair and The Linde Group, including the Combined Group’s future financial position, operating results, strategy and plans;

 

   

the effects of divestitures of businesses of Praxair and The Linde Group in connection with the Business Combination;

 

   

the Combined Group’s, Praxair’s and The Linde Group’s ability to maintain effective internal controls;

 

   

unanticipated litigation, claims or assessments, as well as the outcome/impact of any current/pending litigation, claims or assessments, including in connection with a potential post-completion reorganization;

 

   

potential security violations to the Combined Group’s, Praxair’s and The Linde Group’s information technology systems;

 

   

the investment performance of either Praxair’s and/or The Linde Group’s pension plan assets, which could require Praxair and/or The Linde Group to increase their pension contributions; and

 

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changes in legislation or governmental regulations affecting the Combined Group, Praxair and The Linde Group; international, national or local economic, social or political conditions or other factors such as currency exchange rates, inflation rates, recessionary or expansive trends, taxes and regulations and laws that could adversely affect Praxair and The Linde Group or their clients.

Accordingly, investors are strongly advised to read this entire document, including PART I (SUMMARY OF THE PROSPECTUS), PART II (Risk Factors), PART X (Business And Certain Information About Linde plc), PART XII (Business And Certain Information About Praxair), PART XIV (Operating and Financial Review Of Praxair), PART XV (Business And Certain Information About The Linde Group) and PART XVII (Operating and Financial Review of The Linde Group). These sections include more detailed descriptions of factors that might have an impact on the business of the Combined Group, Praxair and The Linde Group and the market in which they operate.

 

3.2

Presentation of Financial Information

This Prospectus contains:

 

   

certain audited consolidated and unconsolidated financial information of Linde plc as of December 31, 2017 as well as for the short fiscal year ended December 31, 2017, derived from Linde plc’s audited consolidated and parent company financial statements as of December 31, 2017 as well as for the short fiscal year ended December 31, 2017, prepared in accordance with IFRS as adopted by the EU, that are included herein beginning on page F.1-12 and certain unaudited consolidated financial information of Linde plc as of and for the six months ended June 30, 2018, derived from Linde plc’s unaudited consolidated financial statements as of and for the six months ended June 30, 2018, prepared in accordance with IFRS as adopted by the EU, that are included herein beginning on page F.1-2;

 

   

certain unaudited pro forma condensed combined financial information as of and for the fiscal year ended December 31, 2017, prepared in accordance with IFRS as adopted by the EU, included herein in PART VIII (Unaudited Pro Forma Condensed Combined Financial Information);

 

   

certain audited consolidated financial information of Praxair, Inc. as of December 31, 2017, 2016 and 2015, and for each of the fiscal years in the three-year period ended December 31, 2017, derived from Praxair, Inc.’s audited consolidated financial statements as of and for the fiscal years ended December 31, 2017, 2016 and 2015, prepared in accordance with U.S. GAAP, that are included herein beginning on page F.2-28 (the “Praxair Audited Consolidated Financial Statements”), and certain unaudited condensed consolidated financial information of Praxair, Inc. as of and for the three and six months ended June 30, 2018 and 2017, derived from Praxair, Inc.’s unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2018 and 2017, prepared in accordance with U.S. GAAP, that are included herein beginning on page F.2-2; and

 

   

certain audited consolidated financial information of The Linde Group as of December 31, 2017, 2016 and 2015, and for each of the fiscal years in the three-year period ended December 31, 2017, derived from The Linde Group’s audited consolidated financial statements as of and for the fiscal years ended December 31, 2017, 2016 and 2015 prepared in accordance with IFRS as adopted by the EU, that are included herein beginning on page F.3-22, and certain unaudited interim condensed consolidated financial information of The Linde Group as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017, derived from The Linde Group’s unaudited interim condensed consolidated financial statements as of and for the six months ended June 30, 2018, prepared in accordance with IFRS as adopted by the EU, that are included herein beginning on page F.3-2.

The financial information set forth in this Prospectus has been rounded for ease of presentation. Accordingly, in certain cases, the sum of the numbers in a column in a table may not conform to the total figure given for that column. Negative amounts are presented in parentheses.

 

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For additional information on the presentation of financial information in this Prospectus, see the consolidated financial statements of Linde plc beginning on page F.1-2 of this Prospectus, the consolidated and parent company financial statements of Linde plc beginning on page F.1-12 of this Prospectus, the condensed consolidated financial statements of Praxair, Inc. beginning on page F.2-2 of this Prospectus and the consolidated financial statements of Praxair, Inc. beginning on page F.2-28 of this Prospectus, the interim condensed consolidated financial statements of The Linde Group beginning on page F.3-2 of this Prospectus and the consolidated financial statements of The Linde Group beginning on page F.3-22 of this Prospectus.

 

3.3

Market, Economic and Industry Data

Unless otherwise indicated, the information contained in this Prospectus on the market environment, market developments, growth rates, market trends and competition in the market in which Linde plc, Praxair and The Linde Group operate is taken from publicly available sources, including third-party sources, or reflects Linde plc’s, Praxair’s and The Linde Group’s estimates that are principally based on information from publicly available sources. Linde plc confirms that the information included in this Prospectus that has been sourced from a third party has been accurately reproduced and that, as far as Linde plc is aware and was able to ascertain from such information, no facts have been omitted that would render the reproduced information inaccurate or misleading.

In drafting the Prospectus, the following third party sources were used:

 

   

“Gas Report: Global Market 2017” published by Gasworld Ltd., Cornwall, United Kingdom;

 

   

“CEH Marketing Research Report: Air Separation Gases”, from the series “the Chemical Economics Handbook” published by SRI International, Menlo/California, USA, in September 2002;

 

   

Oxford Economics Macroeconomic Database published by Oxford Economics, Oxford, United Kingdom; and

 

   

“Global Medical Gases Market will Worth USD 23.57 Billion by 2023” published by Researchmentor.us, available under https://researchmentor.us/2018/06/26/global-medical-gases-market/.

Certain statements made in this Prospectus are based on Linde plc’s, Praxair’s or The Linde Group’s own proprietary information, insights, opinions or estimates, and not on any third party independent source; these statements contain words such as “believes”, “expects” and “is of the opinion that”, and as such do not purport to cite, refer to or summarize any third-party or independent source and should not be so read.

Industry publications, third party research and governmental statistics generally state that their information is obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed and that the projections they contain are based on a number of significant assumptions. Although Linde plc believes these sources to be reliable, it does not have access to the information, methodology and other bases for such information and has not independently verified the information.

In this Prospectus, certain statements regarding the competitive and market positions of Praxair and The Linde Group are made. Linde plc believes these statements to be true, based on market data and industry statistics, but has not independently verified the information. Linde plc cannot guarantee that a third party using different methods to assemble, analyze or compute market data or public disclosure from competitors would obtain or generate the same results. In addition, competitors may define their markets and their own relative positions in such markets differently than Linde plc, Praxair or The Linde Group do and may also define various components of their business and operating results in a manner which makes such figures non-comparable with those presented herein.

 

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3.4

Currency Presentation

All references in this Prospectus to “EUR”, “euro” and “€” refer to the legal currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty on the Functioning of the European Union, as amended, and all references to “U.S. dollars,” “U.S.$” and “$” refer to the legal currency of the United States of America.

 

3.5

Exchange Rates

The table below shows the low, high, average and period end noon buying rates in The City of New York for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York for U.S.$ per €1.00. The average is computed using the noon buying rate on the last business day of each month during the period indicated.

 

     Exchange Rates  
     Low      High      Average      Period End  
     (U.S. dollars per euro)  

Period

           

2017

     1.0416        1.2041        1.1396        1.2022  

2016

     1.0375        1.1516        1.1029        1.0552  

2015

     1.0524        1.2015        1.1032        1.0859  

2014

     1.2101        1.3927        1.3210        1.2101  

2013

     1.2774        1.3816        1.3303        1.3779  

The table below shows the high and low noon buying rates in The City of New York for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York for U.S.$ per €1.00 for the periods indicated.

 

     Exchange Rates  
     Low      High      Average      Period End  
     (U.S. dollars per euro)  

Period

           

October 1, 2018 – October 19, 2018

     1.1482        1.1594        1.1539        1.1593  

September 2018

     1.1566        1.1773        1.1667        1.1622  

August 2018

     1.1332        1.1720        1.1547        1.1596  

July 2018

     1.1604        1.1744        1.1685        1.1706  

June 2018

     1.1577        1.1815        1.1679        1.1677  

May 2018

     1.1551        1.2000        1.1823        1.1679  

April 2018

     1.2074        1.2384        1.2270        1.2074  

March 2018

     1.2216        1.2440        1.2334        1.2320  

February 2018

     1.2211        1.2482        1.2340        1.2211  

January 2018

     1.1922        1.2488        1.2197        1.2428  

The rates presented above may differ from the actual rates used in the preparation of the Linde plc Group’s, Praxair’s and The Linde Group’s financial statements and other financial information appearing in this Prospectus. The inclusion of such rates is not meant to suggest that the U.S. dollar amounts actually represent euro amounts or that such amounts could have been converted to U.S. dollars at any particular rate, if at all.

 

3.6

Documents Available for Inspection

Until the completion of the Business Combination, the following documents, or copies thereof, may be inspected during regular business hours at Linde plc’s registered office at Ten Earlsfort Terrace, Dublin 2, D02 T380, Ireland:

 

   

the Linde plc constitution;

 

   

the audited consolidated and parent company financial statements of Linde plc as of December 31, 2017 and for the period from April 18, 2017 (the date of Linde plc’s incorporation) through December 31, 2017, and the unaudited consolidated financial statements of Linde plc as of and for the six months ended June 30, 2018, in each case prepared in accordance with IFRS as adopted by the EU;

 

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certain unaudited pro forma condensed combined financial information as of and for the fiscal year ended December 31, 2017, prepared in accordance with IFRS as adopted by the EU;

 

   

Praxair, Inc.’s audited consolidated financial statements as of December 31, 2017, 2016 and 2015, and for each of the fiscal years in the three-year period ended December 31, 2017, prepared in accordance with U.S. GAAP, and Praxair, Inc.’s unaudited condensed consolidated financial statements as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017, prepared in accordance with U.S. GAAP; and

 

   

The Linde Group’s audited consolidated financial statements as of December 31, 2017, 2016 and 2015, and for each of the fiscal years in the three-year period ended December 31, 2017, prepared in accordance with IFRS as adopted by the EU, and The Linde Group’s unaudited interim condensed consolidated financial statements as of and for the six months ended June 30, 2018, prepared in accordance with IFRS as adopted by the EU.

The listed documents will also be available in electronic form for the life of this Prospectus at Linde plc’s website. Information contained on Linde plc’s website does not constitute part of this Prospectus and is not incorporated by reference into this Prospectus.

Linde AG publishes its annual and interim reports and other information on its website www.linde.com. Information contained in or otherwise accessible through this website is not a part of this Prospectus.

Praxair, Inc. files annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”). You may read and copy any document that it files at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about its public reference room. SEC filings are also available to the public at the SEC’s website at www.sec.gov. Information contained in or otherwise accessible through this website is not a part of this Prospectus. In addition, you may inspect these annual, quarterly and current reports, and other information Praxair, Inc. files with the SEC at the offices of Praxair, Inc. at 10 Riverview Drive, Danbury, Connecticut 06810-6268.

 

3.7

Potential Interests

Linde plc has entered into the Business Combination Agreement with Praxair, Inc., Linde AG, Zamalight Holdco and Merger Sub. Such other parties to the Business Combination Agreement are persons acting jointly with Linde plc in the Exchange Offer pursuant to Section 2(5) sentence 1 of the German Takeover Act and have an interest in the completion of the Business Combination.

Bank of America Merrill Lynch International Limited Zweigniederlassung Frankfurt am Main (“BofA Merrill Lynch”), Credit Suisse Securities (USA) LLC, Goldman Sachs AG (“Goldman Sachs”), Morgan Stanley Bank AG and its affiliates (“Morgan Stanley”) and Perella Weinberg Partners UK LLP (“Perella Weinberg”) act as financial advisors to Linde AG or Praxair, Inc. in connection with the proposed Business Combination and will receive fees for such services. A portion of the fees of Credit Suisse Securities (USA) LLC, Morgan Stanley, and Perella Weinberg and all of Goldman Sachs’ fees are contingent upon completion of the Business Combination towards which the Admission is a necessary step.

The Listing Agent is acting exclusively for Linde plc and for no one else and will not regard any other person as its client in relation to the Admission and will not be responsible to anyone other than to Linde plc for giving advice in relation to the Admission. The Listing Agent and/or its affiliates have engaged, and may in the future from time to time continue to engage in investment banking, financial advisory and ancillary activities in the ordinary course of business with certain members of The Linde Group, Praxair, Linde plc Group or the Combined Group, in respect of which they have and may in the future, receive customary fees and commissions.

 

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Some of the Praxair directors and executive officers as well as some of the members of the Linde AG Executive Board and the Linde AG Supervisory Board (including, in each case, those who have been appointed to the Linde plc Board of Directors or will be members of the management committee of the Combined Group (the “Management Committee”)) may have interests in the Business Combination that are different from, or in addition to, the interests of Linde plc Shareholders. In the case of Praxair directors and executive officers these interests include (i) the continued service of certain directors and executive officers following the completion of the Business Combination, (ii) the treatment of stock options, restricted stock units and other equity-based awards, (iii) severance benefits available to certain Praxair executive officers upon a qualifying termination following the Business Combination, (iv) treatment of cash amounts deferred or contributed pursuant to Praxair’s compensation deferral programs and retirement plans, and (v) the indemnification of Praxair directors and executive officers. In the case of members of the Linde AG Executive Board and the Linde AG Supervisory Board these interests include (i) the continued or future membership of certain board members on the Linde plc Board of Directors or the Management Committee, (ii) the treatment of equity awards, investment shares and deferral shares of members of the Linde AG Executive Board and the Linde AG Supervisory Board, (iii) the release from the commitment for members of the Linde AG Supervisory Board to acquire and hold Linde AG Shares and other adjustments to the internal share ownership policy for members of the Linde AG Supervisory Board, (iv) severance benefits, and (v) indemnification of members of the Linde AG Executive Board and Linde AG Supervisory Board by Linde plc or any of its subsidiaries. Furthermore, Prof. Dr. Wolfgang Reitzle, current Chairman of the Linde AG Supervisory Board and the Chairman of the Linde plc Board of Directors, is an advisory partner of Perella Weinberg; this advisory mandate has been inactive since June 2016. Perella Weinberg is acting as financial advisor to Linde AG in connection with the Business Combination and will receive fees for such services.

 

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PART IV

GENERAL INFORMATION ABOUT THE LINDE PLC SHARES AND THE ADMISSION

The subject matter of the Prospectus is the admission of up to 558,147,436 newly issued ordinary registered shares of €0.001 each in the capital of Linde plc (the “Linde plc Shares”) to trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment thereof with additional post-admission obligations (Prime Standard). On October 23, 2018, the Linde plc Board of Directors approved the issuance of the Linde plc Shares and granted authority to certain authorized persons to determine and issue a final number of Linde plc Shares as required in connection with the Business Combination. It is expected that 263,147,436 Linde plc Shares intended for the settlement of the Exchange Offer will be issued on or about the date hereof and that up to 295,000,000 Linde plc Shares intended for the settlement of the Merger will be issued following the settlement of the Exchange Offer prior to the effective time of the Merger, in each case on the basis of the authorization included in the Linde plc constitution (see section “20.2.1 Current Authorized and Issued Share Capital”) and the resolution of the Linde plc Board of Directors described above. The final number of shares is expected to be determined on or about October 30, 2018.

 

4.1

Voting Rights

The holders of Linde plc Shares are entitled to one vote for each share upon all matters presented to the Linde plc Shareholders. Subject to any preferences granted to other classes of Linde plc securities that may be outstanding in the future (including any preferred shares), there are no voting right restrictions or preferences with respect to shareholders of Linde plc. For a more detailed discussion, see “20.2 Description Of Linde plc Shares and Shareholder Rights.”

 

4.2

Dividend and Liquidation Rights

The Linde plc Shares will carry full dividend rights following their issuance. The holders of Linde plc Shares are entitled to receive such dividends as the Linde plc Board of Directors from time to time may pay out of funds legally available for distribution. There is no fixed date on which an entitlement to dividends arises or dividends are paid. There are no dividend restrictions or specific procedures relevant to the payment of dividends to shareholders resident outside of Ireland. There is no set dividend rate and dividends in respect of Linde plc Shares are not cumulative in nature. Entitlement to dividends is subject to the preferences granted to other classes of securities Linde plc may have outstanding in the future, including any preferred shares, and may be restricted by the terms of Linde plc’s future debt instruments. In the event of liquidation of Linde plc, holders of Linde plc Shares are entitled to share in any assets of Linde plc remaining after satisfaction in full of its liabilities and satisfaction of such dividend and liquidation preferences of holders of other classes of securities of Linde plc, including any preferred shares. Linde plc may not issue any fractions of shares upon any occasion of the declaration, issuance and distribution of a dividend payable in shares; all such fractions to which any shareholder might otherwise be entitled in connection with any such declaration, issuance, distribution or exchange will be eliminated and disposed of by such method, authorized, permitted or not prohibited by law, as may be determined by the Linde plc Board of Directors. For a more detailed discussion, see PART VI (Dividend Policy) and “20.2 Description Of Linde plc Shares and Shareholder Rights.”

 

4.3

Form and Certification; Transfer Agent and Registrar

Subject to limited exceptions, no Linde plc Shareholder is or will be entitled to receive a share certificate for any Linde plc Shares held by him or her. Linde plc Shares will therefore be generally held in uncertificated registered shares form. The Linde plc Shares will be deposited upon issuance in a securities account on behalf of The Depository Trust Company, a limited purpose trust company in New York, New York (“DTC”), and registered in the name of DTC’s nominee, Cede & Company (“Cede & Co.”), whereby DTC’s nominee will become the legal owner of the Linde plc Shares. With respect to the Linde plc Shares issued as exchange offer consideration for the tendered Linde AG Shares, DTC will credit Clearstream’s DTC participant account with such shares and Clearstream will in turn credit interests in such shares to the account of the settlement agent at Clearstream in favor of the former Linde AG Shareholders. The settlement agent will arrange for the transfer of interests in the Linde plc Shares through Clearstream to the custodian banks.

 

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DTC will act as third party depositary for Clearstream and will hold such shares on behalf of the Linde AG Shareholders through a custodial chain between DTC, Clearstream and the custodian banks.

 

4.4

Currency of the Issuance

The Linde plc Shares are denominated in euro.

 

4.5

Stock Exchange Listings and Listing Agent

 

4.5.1

Linde plc Shares

On August 27, 2018, Linde plc applied for admission of the Linde plc Shares to listing and trading on the NYSE (trading in U.S. dollars). It is expected that admission will be granted prior to completion of the Business Combination and that trading on the NYSE will commence on or about October 31, 2018.

On October 22, 2018, Linde plc applied for admission of the Linde plc Shares to listing and trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange and the sub-segment thereof with additional post-admission obligations (Prime Standard) (trading in euros). It is expected that (i) 263,147,436 Linde plc Shares intended for the settlement of the Exchange Offer will be admitted to trading on or about October 25, 2018 and that trading in Linde plc Shares on the Frankfurt Stock Exchange will commence on or about October 29, 2018 and that (ii) up to 295,000,000 Linde plc Shares intended for the settlement of the Merger will be admitted to trading on or about October 31, 2018 and that such Linde plc Shares will be introduced to trading on the Frankfurt Stock Exchange on or about November 1, 2018. However, there is no guarantee that the Admission will be approved.

It is expected that on the day of completion of the Business Combination the Linde plc Shares will be credited to holders of Praxair Shares (“Praxair Shareholders”) (in the case of Praxair Shareholders of record, subject to their prior authorization through, among other things, a letter of transmittal) and to Linde AG Shareholders holding Linde AG Shares which were tendered in the Exchange Offer.

Linde plc will seek inclusion in the S&P 500 and DAX 30 indices.

 

4.5.2

Praxair Shares

Praxair Shares, which are listed on the NYSE under the symbol “PX,” will be delisted from the NYSE on or as soon as practicable after the completion of the Business Combination, as permitted by applicable law, and deregistered under the Exchange Act, and Praxair, Inc. will no longer be required to file periodic reports with the SEC.

 

4.5.3

Linde AG Shares

It is expected that trading in Linde AG Shares tendered in the Exchange Offer will end on the Business Day prior to commencement of trading of Linde plc Shares on the Frankfurt Stock Exchange. Linde AG Shares not tendered will continue to be traded under ISIN DE0006483001, WKN 648300 and the new ticker symbol LNA until the effective time of the intended cash-merger squeeze-out.

 

4.5.4

Listing Agent

Credit Suisse Securities (Europe) Limited (“Credit Suisse” or the “Listing Agent”) is acting as listing agent in connection with the application for admission of the Linde plc Shares to listing and trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange and the sub-segment thereof with additional post-admission obligations (Prime Standard).

No representation or warranty, express or implied, is made or given by or on behalf of the Listing Agent or any of its affiliates or any of their respective directors, officers or employees or any other person, as to the accuracy, completeness or fairness of the information or opinions contained in this Prospectus, and nothing contained in this Prospectus, is, or shall be relied upon as, a promise or representation by the Listing Agent or any of its affiliates as to the past or future.

 

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Apart from the responsibilities and liabilities, if any, which may be applicable under mandatory law or imposed by the Central Bank of Ireland, the Frankfurt Stock Exchange and/or BaFin, Credit Suisse, in its capacity as Listing Agent, does not accept any responsibility for, or authorize the contents of, this Prospectus or its issue or any other statements made or purported to be made by either itself or on its behalf in connection with Praxair, The Linde Group, The Linde plc Group, the Admission or the Linde plc Shares. Accordingly, the Listing Agent disclaims all and any liability, whether arising in tort or contract or otherwise in respect of this Prospectus and/or any such statement.

 

4.6

Information to Distributors

Each distributor is responsible for undertaking its own target market assessment with respect to the Linde plc Shares and determining appropriate distribution channels.

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended (“MiFID II”); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the “MiFID II Product Governance Requirements”), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any “manufacturer” (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Linde plc Shares have been subject to a product approval process by the Listing Agent, which has determined that the Linde plc Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the “Target Market Assessment”).

Notwithstanding the Target Market Assessment, any person subsequently offering, selling or recommending the Linde plc Shares (a “distributor”) should note that: the price of the Linde plc Shares may decline and investors could lose all or part of their investment; the Linde plc Shares offer no guaranteed income and no capital protection; and an investment in the Linde plc Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom.

The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to any subsequent offering or sale of the Linde plc Shares and does not constitute (i) an assessment of suitability or appropriateness for the purposes of MiFID II or (ii) a recommendation to any investor or group of investors to invest in, purchase, or take any other action whatsoever with respect to, the Linde plc Shares.

 

4.7

ISIN/WKN/Ticker Symbol

The International Securities Identification Number, the German Securities Code and the Ticker Symbol of the Linde plc Shares will be as follows:

 

International Securities Identification Number (ISIN)

   IE00BZ12WP82

German Securities Code (Wertpapierkennnummer) (WKN)

   A2D SYC

Ticker Symbol

   LIN.

 

4.8

Existing Quotation

Linde plc Shares are not currently listed or traded on any exchange.

 

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4.9

Share Transfer Restrictions

In accordance with the Linde plc constitution, Linde plc Shares are freely transferrable, subject to the Linde plc Board of Directors’ right to refuse to register a transfer in the following circumstances:

 

   

the instrument of transfer is not duly stamped, if required, and lodged, accompanied by the certificate (if any) for the shares to which it relates and such other evidence as the Linde plc Board of Directors may reasonably require to show the right of the transferor to make the transfer;

 

   

the instrument of transfer is in respect of more than one class of shares;

 

   

the instrument of transfer is in favor of more than four persons jointly;

 

   

the Linde plc Board of Directors is not satisfied that all applicable consents, authorizations, permissions or approvals of any governmental body or agency in Ireland or any other applicable jurisdiction required to be obtained under relevant law prior to such transfer have been obtained; or

 

   

the Linde plc Board of Directors is not satisfied that the transfer would not violate the terms of any agreement to which Linde plc (or any of its subsidiaries) and the transferor are party or subject.

 

4.10

Designated Sponsor

The Listing Agent has agreed to assume the function of a designated sponsor of the Linde plc Shares traded on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse). The Listing Agent is entitled to designate an appropriately admitted third party to perform this function. Pursuant to the designated sponsor agreement expected to be concluded between the Listing Agent and Linde plc, the designated sponsor will, among other things, place limited buy and sell orders for the Linde plc Shares in the electronic trading system of the Frankfurt Stock Exchange during regular trading hours. This is intended to achieve greater liquidity in the market for the Linde plc Shares.

 

4.11

Material Costs of the Admission

The costs related to the Admission of the Linde plc Shares are expected to total approximately $6.5 million net of any applicable value added tax. No expenses will be charged to investors in Linde plc Shares by Linde plc.

 

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PART V

THE BUSINESS COMBINATION

In Linde plc’s view, the Business Combination will bring together two leading companies in the global industrial gases industry, leveraging the proven strengths of each. Linde plc believes the transaction will combine The Linde Group’s long-held expertise in technology with Praxair’s efficient operating model, thus creating a global leader. The Combined Group is expected to enjoy strong positions in key geographies and end markets and to create a more diverse and balanced global portfolio.

 

5.1

Information About the Companies

 

5.1.1

Linde plc

Linde plc is a public limited company formed under the laws of Ireland on April 18, 2017 solely for the purpose of effecting the Business Combination. Upon the completion of the Business Combination, Linde plc will become the parent company of Praxair, Inc. and Linde AG. To date, Linde plc has not conducted any material activities other than those incidental to its formation and the matters contemplated by the Business Combination Agreement (including guarantees related to divestitures in connection with the Business Combination). On May 26, 2017, Linde plc formed Zamalight Holdco LLC (“Zamalight Holdco”), a Delaware limited liability company, which in turn formed Zamalight Subco, Inc. (“Merger Sub”). On July 26, 2017, Linde plc formed Linde Holding GmbH, a German limited liability company (Gesellschaft mit beschränkter Haftung), which on July 28, 2017, in turn formed Linde Intermediate Holding AG, a German stock corporation (Aktiengesellschaft).

Linde plc’s principal executive offices are located at The Priestley Centre, 10 Priestley Road, The Surrey Research Park, Guildford, Surrey GU2 7XY, United Kingdom, and its telephone number at that location is +44 1483 242200. Linde plc’s registered office is located at Ten Earlsfort Terrace, Dublin 2, D02 T380, Ireland. Linde plc is registered in the United Kingdom as an overseas company with number FC034479 and its UK establishment is registered at the principal executive offices of the company with registration number BR019569.

 

5.1.2

Praxair, Inc.

Praxair, Inc., a Delaware corporation, was founded in 1907 and became an independent publicly traded company in 1992. Praxair believes it is a leading industrial gas company in North and South America and one of the largest worldwide, based on 2017 revenue. It continues to be a major technological innovator in the industrial gases industry. Its primary products in its industrial gases business are atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene). Praxair serves a diverse group of industries including healthcare, petroleum refining, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals and water treatment. Praxair also designs, engineers, and builds equipment that produces industrial gases primarily for internal use. Praxair’s surface technologies segment supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders.

Praxair, Inc.’s principal executive offices are located at 10 Riverview Drive, Danbury, Connecticut 06810-6268, and its telephone number at that location is (203) 837-2000. Its registered office in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, 19808, and its common stock is listed on the NYSE under the symbol “PX” and ISIN US74005P1049.

As of January 1, 2017, 284, 900,776 Praxair Shares were outstanding. As of December 31, 2017, 286,776,991 Praxair Shares were outstanding. For reconciliation for the year 2017, see Praxair’s Consolidated Statements of Equity included in the Praxair Audited Consolidated Financial Statements beginning on page F.2-28 of this Prospectus.

 

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5.1.3

Linde AG

Linde AG, a German stock corporation (Aktiengesellschaft), was founded in 1879. The Linde Group is one of the largest industrial gases companies worldwide (according to the report “Gas Report: Global Market 2017” published by Gasworld Ltd., Cornwall, United Kingdom, based on market share in 2016). The Linde Group offers a wide range of compressed and liquefied gases as well as chemicals and is a partner for a variety of industries. The Linde Group’s gases, such as oxygen, nitrogen, hydrogen, helium and specialty gases, are used, for example, in the energy sector, steel production, chemical processing, environmental protection and welding, as well as in food processing, glass production, electronics and in the healthcare sector. The Linde Group is also active in the sale of products in the field of medical technology, of pharmaceutical products and of other products in the healthcare area. The Linde Group’s engineering business includes the technology, engineering, procurement, project management and construction of industrial plants. The Linde Group’s plants are used in a wide variety of fields such as the petrochemical and chemical industries, refineries and fertilizer plants, to recover air gases, to produce hydrogen and synthesis gases and to treat natural gas.

Linde AG’s principal executive offices are located at Klosterhofstrasse 1, 80331 Munich, Germany and its telephone number at that location is +49 89 3575701. Its registered office is in Munich, Germany and its shares are listed on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) and the stock exchanges in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart, as well as the Tradegate Exchange and are also traded on the open market (Freiverkehr) of the Hanover stock exchange, in each case under the symbol “LIN” and ISIN DE0006483001 (for Linde AG Shares not tendered into the Exchange Offer) and under the symbol “LINU” and ISIN DE000A2E4L75 (for Linde AG Shares tendered into the Exchange Offer). Linde AG Shares not tendered in the Exchange Offer will continue to be traded under ISIN DE0006483001, WKN 648300 and the new ticker symbol LNA until the effective time of the intended cash-merger squeeze-out.

As of January 1, 2017, the share capital of Linde AG was divided into 185,733,180 bearer shares, without par value, of which 185,638,071 shares were outstanding. As of December 31, 2017, 185,638,071 shares were outstanding. For reconciliation for the year 2017, see Note 20 to The Linde Group’s consolidated financial statements on page F.3-58.

 

5.2

Business Combination Agreement and Structure of the Business Combination

On June 1, 2017, Linde plc, its subsidiaries Zamalight Holdco and Merger Sub, as well as Praxair, Inc. and Linde AG entered into the Business Combination Agreement, which was amended on August 10, 2017. Pursuant to the Business Combination Agreement, Praxair, Inc. and Linde AG have agreed to combine their businesses under Linde plc. The effect of the Business Combination will be that Praxair, Inc. will become an indirect subsidiary of Linde plc through the merger of an indirect wholly-owned subsidiary of Linde plc, Merger Sub, with and into Praxair, Inc., and that Linde AG will become an indirect subsidiary of Linde plc through the Exchange Offer, which was published by Linde plc on August 15, 2017, to acquire each outstanding Linde AG Share for 1.540 Linde plc Shares.

Praxair, Inc. and Linde AG may mutually agree to amend the Business Combination Agreement. However, no amendment may be made which requires further approval by the Praxair Shareholders under applicable law or the rules of any relevant stock exchange unless such further approval is obtained. Furthermore, no amendment may alter the terms of the Exchange Offer. Praxair, Inc. and Linde AG may terminate the Business Combination Agreement in full at any time prior to the completion of the Exchange Offer by mutual written consent. In addition, the Business Combination Agreement, or certain specified covenants therein, may be terminated for, or may terminate as a result of, certain reasons, including, among others, a permanent injunction or order by any governmental entity in Ireland, the United Kingdom, Germany or the United States that prohibits or makes illegal the completion of the Business Combination, the occurrence of a change, event, occurrence or effect that has had or is reasonably expected to have a “material adverse change” on Linde AG or Praxair, Inc., the failure by either party to perform in any material respect the best efforts covenant to obtain regulatory approvals or the eventual failure to obtain approval by requisite governmental regulators and authorities.

 

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The following diagram illustrates the simplified structure of Praxair, Inc., Linde AG and the Linde plc Group immediately after the completion of the Business Combination:

 

LOGO

Following the completion of the Business Combination, Linde plc will be the ultimate holding company of the Combined Group, which will operate through its subsidiary undertakings, Linde AG and Praxair, Inc., Linde AG and Praxair, Inc. will continue to be the holding companies of The Linde Group and Praxair, respectively.

Following the settlement of the Exchange Offer, Linde plc intends to pursue a cash-merger squeeze-out, by which Linde plc (indirectly) would acquire all Linde AG Shares owned by remaining minority outside Linde AG Shareholders for adequate cash compensation and which would eliminate any minority shareholder interests in Linde AG remaining after the settlement of the Exchange Offer. For a more complete description of the contemplated post-completion reorganization by way of a cash-merger squeeze-out, see “5.6 Cash-Merger Squeeze-Out“.

The Combined Group is expected to benefit from targeted annual synergies and cost efficiencies ranging from $1.1 billion to $1.2 billion to be achieved over approximately three years. The figure includes existing cost reduction programs of Praxair and The Linde Group which are independent of the Business Combination, including The Linde Group’s LIFT program as well as additionally identified cost reduction potentials. Linde plc intends to achieve the total amount of synergies and efficiency savings irrespective of the allocation to the underlying drivers. For further information, see “2.1.1 Linde plc, Praxair and The Linde Group had to obtain certain governmental and regulatory approvals to consummate the Business Combination. Some of these approvals are subject to restrictions, divestiture or other requirements or other conditions imposed by certain governmental and regulatory agencies, such as the European Commission and the U.S. Federal Trade Commission, which may adversely impact the business, financial condition or results of operations of the Combined Group.

 

5.3

The Exchange Offer and the Merger

The Business Combination Agreement contemplates that Linde AG will become an indirect subsidiary of Linde plc through the Exchange Offer. The parties to the Business Combination Agreement have agreed that, immediately after the time that Linde plc exchanges Linde plc Shares for the Linde AG Shares that have been validly tendered and not withdrawn in the Exchange Offer, Merger Sub will merge with and into Praxair, Inc., with Praxair, Inc. surviving the Merger as an indirect wholly-owned subsidiary of Linde plc.

 

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On August 15, 2017, Linde plc published the offer document for the Exchange Offer (the “Offer Document”). Under the terms of the Exchange Offer, Linde plc offered to acquire each outstanding Linde AG Share in exchange for 1.540 Linde plc Shares, subject to certain closing conditions being satisfied. The initial acceptance period of the Exchange Offer expired on October 24, 2017. The (extended) acceptance period and the mandatory additional acceptance period of the Exchange Offer expired on November 7, 2017 and November 24, 2017, respectively. Withdrawal rights expired on November 7, 2017. The Exchange Offer has been accepted for a total of 170,874,958 Linde AG Shares, which corresponds to an acceptance rate of approximately 92% of the share capital of Linde AG.

On September 27, 2017, the Praxair Shareholders approved the Business Combination at a Praxair special shareholder meeting. At the effective time of the Merger, each outstanding Praxair Share will be converted into the right to receive one fully paid and non-assessable Linde plc Share. This does not apply to Praxair Shares that are held by Praxair, Inc., Linde plc or any of their direct or indirect wholly-owned subsidiaries (unless held on behalf of third parties), which will be canceled for no consideration instead.

The exchange ratios for the Exchange Offer and the Merger are fixed and will not be adjusted to reflect trading prices of Praxair Shares or Linde AG Shares prior to the completion of the Business Combination.

Under the terms of the Exchange Offer, all closing conditions had to be satisfied within twelve months following the expiration of the initial acceptance period of the Exchange Offer, i.e., by October 24, 2018. On October 22, 2018, Linde plc published a notification stating that, for purposes of the Exchange Offer, all closing conditions have been satisfied and that the Exchange Offer will be completed.

 

5.3.1

Governmental and Regulatory Approvals

On April 26, 2018, the Committee on Foreign Investment in the United States (CFIUS) cleared the Business Combination. On April 27, 2018, Linde plc published a notification stating that, for purposes of the Exchange Offer, the related closing condition has been satisfied.

Further, the Business Combination has been approved by the competent antitrust authorities in the following jurisdictions or the necessary waiting periods in the following jurisdictions have expired (limited to those antitrust approvals the receipt of which has been a condition to the closing of the Exchange Offer):

 

   

Brazil: Praxair, Inc. and Linde AG applied to the Brazilian Conselho Administrativo de Defesa Econômica on December 22, 2017 for antitrust approval of the Business Combination. The last approval required to meet the related closing condition was granted on August 22, 2018. In connection with the merger control review, Praxair, Inc. and Linde AG committed to divest Linde AG’s industrial gases business in Brazil. For further information on divestitures, see section “5.3.2.2 Significant Divestitures in North and South America” below. On August 23, 2018, Linde plc published a notification stating that, for purposes of the Exchange Offer, the related closing condition has been satisfied.

 

   

Canada: Praxair, Inc. and Linde AG applied to the Competition Bureau Canada on September 7, 2017 for antitrust approval of the Business Combination. The statutory waiting period expired on May 3, 2018. For further information on related divestitures, see section “5.3.2.2 Significant Divestitures in North and South America” below. On May 4, 2018, Linde plc published a notification stating that the Competition Bureau Canada will continue to assess the Business Combination but that, for purposes of the Exchange Offer, the related closing condition has been satisfied.

 

   

China: Praxair, Inc. and Linde AG applied to the Ministry of Commerce of the People’s Republic of China on August 14, 2017 for antitrust approval of the Business Combination. The filing was subsequently withdrawn and resubmitted. Approval was granted by the State Administration for Market Regulation of the People’s Republic of China on September 30, 2018. In connection with the merger control review, Praxair, Inc. and Linde AG committed to divest certain Linde AG and Praxair, Inc. assets in China. For further information on divestitures, see section “5.3.2.3 Significant Divestitures in the People’s Republic of China, India and the Republic of Korea” below. On October 1, 2018, Linde plc published a notification stating that, for purposes of the Exchange Offer, the related closing condition has been satisfied.

 

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European Union: Praxair, Inc. and Linde AG notified the Business Combination to the European Commission on January 12, 2018. The last approval required to meet the related closing condition was granted by the European Commission on October 22, 2018. In connection with the merger control review, Praxair, Inc. and Linde AG made certain commitments, mainly to divest Praxair, Inc.’s industrial gases business in the European Union as well as Praxair, Inc.’s shareholding in its Italian joint venture Società Italiana Acetilene e Derivati S.p.A. For further information on divestitures, see section “5.3.2.1 Significant Divestitures in the European Union” below. On October 22, 2018, Linde plc published a notification stating that, for purposes of the Exchange Offer, the related closing condition has been satisfied.

 

   

India: Praxair, Inc. and Linde AG applied to the Competition Commission of India on January 11, 2018 for antitrust approval of the Business Combination. Approval was granted on September 7, 2018. In connection with the merger control review, Praxair, Inc. and Linde AG committed to divest certain assets and shareholdings in India. For further information on divestitures, see section “5.3.2.3 Significant Divestitures in the People’s Republic of China, India and the Republic of Korea” below. On September 7, 2018, Linde plc published a notification stating that, for purposes of the Exchange Offer, the related closing condition has been satisfied.

 

   

Mexico: Praxair, Inc. and Linde AG applied to the Federal Economic Competition Commission on December 6, 2017 for antitrust approval of the Business Combination. Approval was granted on June 21, 2018. On June 22, 2018, Linde plc published a notification stating that, for purposes of the Exchange Offer, the related closing condition has been satisfied.

 

   

Russia: Praxair, Inc. and Linde AG applied to the Federal Antimonopoly Service of the Russian Federation on September 15, 2017 for antitrust approval of the Business Combination. Approval was granted on October 13, 2017 and, pursuant to and for purpose of applicable Russian rules, lasts for one year following the grant of such approval. On October 16, 2017, Linde plc published a notification stating that, for purposes of the Exchange Offer, the related closing condition has been satisfied. Based on the Company’s understanding of applicable law, the closing condition remains satisfied notwithstanding the expiry of such approval and therefore does not impair the valid and effective completion of the Business Combination.

 

   

South Korea: Praxair, Inc. and Linde AG applied to the Korea Fair Trade Commission on August 14, 2017 for antitrust approval of the Business Combination. Approval was granted on October 8, 2018. In connection with the merger control review, the Korea Fair Trade Commission required Linde AG and Praxair, Inc. to divest certain assets in South Korea. For further information on divestitures, see section “5.3.2.3 Significant Divestitures in the People’s Republic of China, India and the Republic of Korea” below. On October 8, 2018, Linde plc published a notification stating that, for purposes of the Exchange Offer, the related closing condition has been satisfied.

 

   

United States: Praxair, Inc. and Linde AG applied to the FTC on July 7, 2017 for antitrust approval of the Business Combination. Approval was granted on October 22, 2018. In connection with the merger control review, Linde plc, Praxair, Inc. and Linde AG entered into a Consent Agreement with the FTC which provides for certain divestitures and other commitments in North and South America. For further information, see section “5.3.2.2 Significant Divestitures in North and South America” below. On October 22, 2018, Linde plc published a notification stating that, for purposes of the Exchange Offer, the related closing condition has been satisfied and that, therefore, all closing conditions have been satisfied and the Exchange Offer will be completed.

 

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5.3.2

Significant Divestitures agreed in light of the Business Combination

In connection with the antitrust approvals obtained in respect of the Business Combination Linde AG and Praxair, Inc. have committed vis-à-vis the relevant authorities to divest certain assets or businesses of The Linde Group and/or Praxair. Against this background, the divestitures described in the following sections are intended to address certain overlaps in the combined product portfolio of The Linde Group and Praxair in light of the antitrust approval and review processes for the Business Combination. These divestitures have not yet been consummated since they are subject to the completion of the Business Combination. Therefore, none of the divestitures have been reflected in the historical financial information included or the business activities described in this Prospectus. For their treatment in the unaudited pro forma condensed combined financial information included in PART VIII (Unaudited Pro Forma Condensed Combined Financial Information), see section “8.8 Divestitures”.

To allocate the rights and obligations in connection with the divestitures described in the following sections, Linde AG, Praxair, Inc. and Linde plc entered into an allocation agreement on July 4, 2018. Under such agreement, the rights and obligations in connection with any divestiture shall generally rest with the seller of the related assets.

Linde plc intends to use the net proceeds from any divestitures made in light of the Business Combination for corporate purposes, including to finance the compensation to be paid in the course of the cash-merger squeeze-out as described in “5.6 Cash-Merger Squeeze-Out.”

 

5.3.2.1

Significant Divestitures in the European Union

On December 5, 2017, Praxair, through its subsidiaries Praxair Italia S.r.l., Rivoira Pharma S.r.l. and Rivoira S.p.A. (“Rivoira”), signed an exchange agreement with Società Italiana Acetilene e Derivati S.p.A. (“SIAD”), Samac S.r.l. and Flow Fin S.p.A. (“Flow Fin”), Praxair’s joint venture partner in SIAD and in Rivoira (the “SIAD SPA”). Under the SIAD SPA, (i) Praxair will sell its participation in SIAD to Flow Fin and its participation in certain other Italian companies to SIAD, (ii) Flow Fin will sell its participation in Rivoira S.p.A. and in certain other Italian companies to Praxair and (iii) SIAD will sell its participation in an Italian Praxair subsidiary to Praxair. The sales are expected to result in a net purchase price of approximately €90 million payable by Praxair to Flow Fin. Following the closing of the transaction, joint ventures between Praxair and Flow Fin will be terminated, Flow Fin will hold 100% of the shares in SIAD and Praxair will hold 100% of the shares in Rivoira. Praxair’s shares in Rivoira and the other Italian companies acquired under the SIAD SPA will be subject to the Praxair Europe SPA described below.

The agreement is conditioned on the successful consummation of the Business Combination and other regulatory approvals. The SIAD SPA contains representations, warranties and covenants that are customary for a transaction of this nature.

On July 5, 2018, Praxair, Inc. signed a sale and purchase agreement to sell the majority of its businesses in Europe to Taiyo Nippon Sanso Corporation, an affiliate of Mitsubishi Chemical Holdings Corporation (the “Praxair Europe SPA”). The Praxair Europe SPA was entered into as part of the commitments in connection with the merger control review of the Business Combination by the European Commission. The assets to be sold include Praxair’s industrial gases businesses in Belgium, Denmark, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom with approximately 2,500 employees. The businesses generated annual sales of €1.3 billion in 2017. The purchase price for this transaction is €5.0 billion in cash consideration and is subject to customary adjustments at closing. Under the Praxair Europe SPA, Linde plc has given an independent guarantee as of the completion of the Business Combination for the full, due and timely performance and observance of all obligations of Praxair, Inc. and its local subsidiaries holding shares in the companies operating the businesses to be sold.

The agreement is conditioned on the successful consummation of the Business Combination and other regulatory approvals. The Praxair Europe SPA contains representations, warranties and covenants that are customary for a transaction of this nature. Praxair and Linde plc acting jointly may terminate the Praxair Europe SPA if the Business Combination has not been completed on or before October 24, 2018, or the satisfaction of any of the closing conditions set forth in the Praxair Europe SPA has become impossible, unless, where permissible, waived. If closing of the Praxair Europe SPA has not occurred by May 1, 2019, each of Praxair and Linde plc acting jointly and Taiyo Nippon Sanso Corporation may terminate the Praxair Europe SPA.

 

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Following the closing of the Praxair Europe SPA and the SIAD SPA, Praxair will have minor remaining operations in Europe which will be outside of the industrial gases business and mainly related to coatings.

 

5.3.2.2

Significant Divestitures in North and South America

On July 16, 2018, Linde AG, Praxair, Inc. and Linde plc signed a sale and purchase agreement to sell the majority of The Linde Group’s industrial gases business in North America and certain industrial gases business activities in South America of The Linde Group and Praxair, including substantially all of The Linde Group’s bulk business in the U.S., certain carbon monoxide, hydrogen and steam methane reforming businesses, parts of the local pipeline and specialty gases business and access to the helium sources of The Linde Group (including associated businesses in Puerto Rico and the U.S. Virgin Islands) and The Linde Group’s industrial gases businesses in Brazil, Canada and Colombia, as well as Praxair’s business in Chile and certain customer relations of Praxair in the U.S., to a consortium comprising entities of German industrial gases manufacturer Messer Group and CVC Capital Partners Fund VII. The scope of the divestiture has been supplemented to address additional requirements of the antitrust authorities and is covered by an amendment agreement dated September 22, 2018 and October 19, 2018 (the agreement, as amended, the “Americas SPA”). Certain businesses of The Linde Group in North and South America will not be divested under the Americas SPA, including certain assets related to the atmospheric gases and CO2 business.

In 2017, the businesses of The Linde Group to be sold under the amended Americas SPA generated annual sales of €1.5 billion and EBITDA of €350 million. The purchase price of €3.0 billion is subject to fixed deductions for certain items relating to liabilities of the sold business, and customary adjustments for cash, financial debt and working capital at closing.

Under the Americas SPA, Linde plc has given an independent guarantee to MG Industries GmbH, a purchaser entity that is part of the Messer Group, as of the completion of the Business Combination for the full, due and timely performance of any obligation of Linde AG and Praxair, Inc. under the Americas SPA.

The Americas SPA contains representations, warranties and covenants (including sufficiency of assets in light of the carve-out) that can be considered customary for a transaction of this nature. Closing of the Americas SPA is subject to the completion of the Business Combination and certain regulatory approvals.

Linde AG, Praxair, Inc. and Linde plc acting jointly may terminate the Americas SPA if (i) any of these closing conditions have not been met on or before October 24, 2018, or (ii) the satisfaction of any of these closing conditions has become impossible, unless, where permissible, waived. MG Industries GmbH may terminate the Americas SPA if the closing of the Americas SPA has not occurred prior to April 11, 2019 and in certain other circumstances.

In the course of the merger control proceedings in the United States, Linde plc, Praxair, Inc. and Linde AG entered into an agreement with the FTC dated October 1, 2018 (the “Consent Agreement”) which provides for the divestitures under the Americas SPA and provides for certain additional divestiture commitments in the United States. Such additional divestments include certain businesses relating to the sale of hydrogen, carbon monoxide, syngas and superheated steam produced in Clear Lake, Texas and La Porte, Texas as well as elsewhere in the United States to distinct buyers, respectively. As of the date of this Prospectus, only for certain of these assets a sale and purchase agreement was entered into.

Pursuant to the Consent Agreement, the assets covered thereunder must be divested within 120 calendar days after entering into the Consent Agreement to a buyer that receives the prior approval of the FTC. In the event that any assets are not sold within the ordered 120 days from the effectiveness of the Consent Agreement, the FTC may appoint a divestiture trustee to sell such assets expeditiously and at no minimum price in order to satisfy the requirements under the Consent Agreement.

 

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In addition, under the Consent Agreement, Linde plc, Praxair, Inc. and Linde AG shall (i) continue to operate The Linde Group and Praxair as independent, ongoing, economically viable, competitive businesses held separate, distinct, and apart from each other’s operations (ii) not coordinate any aspect of the operations of The Linde Group and Praxair, including the marketing or sale of any products; and (iii) maintain separate financial ledgers, books, and records that report on a periodic basis, consistent with past practices, the assets, liabilities, expenses, revenues, and income of each (such order, the “Hold Separate Order”). Such Hold Separate Order applies globally and will only expire once the divestitures set forth above, except for the divestitures in Clear Lake, Texas and La Porte, Texas, have been completed (the “Hold Separate Period”).

For a period of 30 days starting on October 22, 2018, the Consent Agreement is subject to public comments which may affect the FTC’s commitment or lead to adjustments to the Consent Agreement.

 

5.3.2.3

Significant Divestitures in the Peoples Republic of China, India and the Republic of Korea

In connection with the merger control proceedings in China, Praxair, Inc. and Linde AG have made certain divestiture commitments to the State Administration for Market Regulation of the People’s Republic of China. Praxair, Inc. and Linde AG have committed to divest Linde AG’s participation in a joint venture concerning four air separation units, helium sourcing contracts and helium customer contracts as well as ancillary support. The divestment assets generated total revenues of approximately $90 million in 2017. As of the date of this Prospectus, no contract regarding the sale of the divestment assets has been signed with any potential purchaser.

In connection with the merger control proceedings in India, Praxair, Inc. and Linde AG have made certain divestiture commitments to the Competition Commission of India. Praxair, Inc. and Linde AG have committed to divest in total four onsite plants and four cylinder filling stations as well as Linde AG’s shareholding in its Indian joint venture with Inox Air Products Private Limited (Bellary Oxygen Company Private Limited (Belloxy)). The assets to be divested generated total revenues of approximately INR8,500 million in 2016 (approximately €100 million). As of the date of this Prospectus, no contract regarding the sale of the divestment assets has been signed with any potential purchaser.

In connection with the merger control proceedings in South Korea, the Korea Fair Trade Commission ordered Praxair, Inc. and Linde AG to divest certain assets in South Korea. Praxair, Inc. and Linde AG are ordered to divest Linde AG’s tonnage and bulk oxygen, nitrogen and argon facilities as well as Praxair, Inc.’s excimer laser gas production line in South Korea. The assets to be divested generated total revenues of approximately €170 million in 2016. As of the date of this Prospectus, no contract regarding the sale of the divestment assets has been signed with any potential purchaser.

 

5.4

Treatment of Equity Awards

 

5.4.1

Praxair Equity Awards

 

5.4.1.1

Praxair Stock Options

At the effective time of the Merger, each Praxair stock option will be converted into an option to purchase Linde plc Shares on substantially the same terms and conditions as were applicable to such Praxair stock option immediately prior to the effective time of the Merger. The number of Linde plc Shares subject to each such Linde plc stock option will equal the number of Praxair Shares subject to each Praxair stock option immediately prior to the effective time of the Merger. Such Linde plc stock option will have the same exercise price per share as the per-share exercise price applicable to such Praxair stock option immediately prior to the effective time of the Merger. As of June 30, 2018, 11.2 million Praxair stock options were outstanding. For further information see Note 10 to the Praxair condensed consolidated financial statements beginning on page F.2-2 of this Prospectus.

 

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5.4.1.2

Praxair Restricted Stock Units

At the effective time of the Merger, each Praxair restricted stock unit (“RSU”) will be converted into a Linde plc RSU on substantially the same terms and conditions as were applicable to such Praxair RSU immediately prior to the effective time of the Merger. The number of Linde plc Shares subject to each such Linde plc RSU will equal the number of Praxair Shares subject to each Praxair RSU immediately prior to the effective time of the Merger. As of June 30, 2018, 0.4 million Praxair RSUs were non-vested. For further information see Note 10 to the Praxair condensed consolidated financial statements beginning on page F.2-2 of this Prospectus.

 

5.4.1.3

Praxair Performance Share Units

At the effective time of the Merger, each Praxair performance share unit (“PSU”) issued by Praxair, Inc. will be converted into a Linde plc RSU on substantially the same terms and conditions as were applicable to such Praxair PSU immediately prior to the effective time of the Merger. The number of Linde plc Shares subject to each such Linde plc RSU will equal the greater of (i) the target number of Praxair Shares subject to such Praxair PSU and (ii) the percentage of the target number of Praxair Shares subject to such Praxair PSU determined in good faith based on the achievement of the performance goals applicable to such Praxair PSU immediately prior to the effective time of the Merger. As of June 30, 2018, 0.4 million Praxair PSUs were non-vested. For further information see Note 10 to the Praxair condensed consolidated financial statements beginning on page F.2-2 of this Prospectus.

 

5.4.2

Linde LTIP

From 2012 to 2017, the members of the Linde AG Executive Board and other key employees participated in Linde AG’s share-based incentive program for executives (the “Linde LTIP”), and, to date, still hold awards under the Linde LTIP. Under the Linde LTIP, members of the Linde AG Executive Board and other key employees were granted Linde stock options to subscribe for Linde AG Shares at an exercise price of €2.56 per share (“Linde Stock Options”), subject to a four-year waiting period and the fulfillment of certain performance and other conditions. To become entitled to exercise Linde Stock Options, the Linde LTIP requires each beneficiary to continue to be employed with The Linde Group throughout the applicable waiting periods (subject to certain “good leaver” provisions). In addition, beneficiaries belonging to certain top management levels of The Linde Group (including the members of the Linde AG Executive Board) were required to make a personal investment in a specific number of Linde AG Shares (“Investment Shares”) and to continue to hold such Investment Shares throughout the applicable waiting periods. Linde AG awards one matching Linde AG Share for free for each Investment Share held throughout the applicable waiting period (“Linde Matching Share Rights”, and collectively with Linde Stock Options, the “Linde Equity Awards”). All other beneficiaries were not required to acquire and hold Investment Shares to obtain Linde Stock Options, provided that if they did so voluntarily, they were entitled to receive Linde Matching Share Rights. According to the terms of the Linde LTIP, Linde AG may deviate from certain requirements of the plan conditions (e.g., by allowing for a cash settlement), in particular to comply with applicable local laws in certain jurisdictions. Both the Linde Stock Options and the Linde Matching Share Rights were granted under the Linde LTIP in annual tranches. The last tranche was granted in June 2017.

The Business Combination Agreement provides that, in connection with the Business Combination, as a general matter, the Linde LTIP and the outstanding Linde Equity Awards that were granted under the Linde LTIP will be terminated. Upon such termination, each outstanding Linde Equity Award for which the applicable waiting period has not yet expired will be partially paid out in cash by Linde AG or the local employer and partially replaced with Linde plc equity awards under a new Long Term Incentive Plan 2018 of Linde plc (the “Linde LTIP 2018”) that are subject to vesting based on continued service until the end of the four-year waiting period applicable to the relevant Linde Equity Award (subject to certain “good leaver” provisions). The extent to which each Linde Equity Award will be paid out in cash, as opposed to being replaced with Linde plc equity awards, will be based on the valuation underlying the payout in cash and on the extent to which the award’s waiting period has elapsed as of completion of the Exchange Offer. Linde plc will grant replacement Linde plc stock options in respect of terminated Linde Stock Options to the extent the waiting period applicable to the terminated Linde Stock Options will not have elapsed up to the time of consummation of the Exchange Offer and it will grant Linde plc RSUs in respect of terminated Linde Matching Share Rights to the extent the waiting period applicable to the terminated Linde Matching Share Rights will not have elapsed up to the time of consummation of the Exchange Offer. Exercisable Linde Stock Options granted in 2014, for which the waiting period has lapsed in June 2018 and which have not been exercised prior to termination, will be fully paid out in cash by Linde AG or the local employer.

 

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