Reuters: Global Markets: Linde shares dip on U.S. acquisition reports

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Linde shares dip on U.S. acquisition reports Jun 28th 2012, 16:29 FRANKFURT | Thu Jun 28, 2012 12:29pm EDT FRANKFURT (Reuters) - Shares in German group Linde (LING.DE), the world's No. 2 industrial gases producer, fell on Thursday on the back of reports it was bidding for U.S. respiratory healthcare provider Lincare (LNCR.O) with an offer that could reach $3.4 billion. Linde shares closed down 1.6 percent at 117.20 euros. Lincare shares rose a quarter in value on Wednesday after the Financial Times Alphaville blog reported that French group Air Liquide (AIRP.PA) - the top industrial gas supplier, and an unnamed private equity bidder may also be in the running for Lincare, as well as Linde. The blog named Rothschild and Lazard as advisers working on the deal and the price Linde might have to pay could be at $40 per share or more. Lincare shares were up 0.5 percent at $31.33 at 1600 GMT. Air Liquide, whose shares closed down 0.1 percent, and Linde declined comment to Reuters. Lincare is a provider of oxygen and respiratory therapy services to patients in the home, with customers suffering from ailments such as emphysema, chronic bronchitis or asthma. DZ Bank analyst Peter Spengler said any acquisition by Linde of a U.S. company providing such services would fit its strategy to expand into the high-growth homecare sector. "Linde's strategy is to sell their gases, which they produce at a very low price, at a very high premium," Spengler said, adding an acquisition price of $40 per share would be dilutive of Linde's future earnings. "It might be financed by additional debt and free cash flow. However a capital hike cannot be ruled out," Spengler said. As of end-2011, Linde's debt stood at 5.09 billion euros ($6.3 billion). Commerzbank said Linde could finance such a takeover without a capital increase. Linde chief executive Wolfgang Reitzle told reporters last month the company might make further acquisitions in the healthcare business, and any possible deal would be manageable in size. Linde bought Air Products' European homecare business in January for $750 million. The business mostly supplies oxygen and other treatments to patients in their homes. That acquisition made Linde a strong No.2 in the homecare business after Air Liquide. DEFENSIVE STOCK While industrial gas companies have generally been regarded as defensive stocks, shrinking demand in southern Europe, which has been hit by Europe's debt crisis, and weakness in the electronics industry have slowed profit growth. Industrial gas suppliers have recently made inroads into the homecare market, which is growing 6-9 percent annually, driven mainly by cost-cuts in hospital operators and an aging population. "Treating a patient with lung disease at home is far cheaper than in a hospital. We thus believe annual growth of this market to be above the 6 percent of the general healthcare gases market," Commerzbank said in its note. While Lincare's operating margins are relatively high, some analysts said its free cash flow had been negative in the past few quarters due to a reimbursement backlog at U.S. hospitals. According to ThomsonReuters' StarMine data, Lincare trades at 13.4 times estimated 12-months earnings, a premium to U.S. rivals Baxter International's (BAX.N) 11.3 multiple, HCA's (HCA.N) 7.1, and an industry average of 8.5. Lincare has a market capitalization of $2.69 billion while Linde's is $25.5 billion. ($1 = 0.8028 euro) (Reporting By Marilyn Gerlach) Link this Share this Digg this Email Reprints

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