Linde Shakeup

Out with the Old

Der Vorstandsvorsitzende der Linde AG, Wolfgang Büchele (l), und Finanzvorstand Georg Denoke sitzen am 16.03.2015 in München (Bayern) bei der Bilanz-Pressekonferenz des Unternehmens nebeneinander. Foto: Tobias Hase/dpa [ Rechtehinweis: (c) dpa ]
Linde CEO Wolfgang Büchele and CFO Georg Denoke will have to go.
  • Why it matters

    Why it matters

    Linde hopes the leadership shakeup will allow the company to move forward after a difficult few years, characterized by major disputes at the top.

  • Facts

    Facts

    • Wolfgang Büchele took over as Linde CEO in May 2014 from the popular Wolfgang Reitzle, who now leads the non-executive supervisory board.
    • A $60-billion merger with U.S. rival Praxair collapsed this week over “governance issues.”
    • Linde lost its spot as the world’s largest industrial gases producer earlier this year after a merger between France’s Air Liquide and U.S. company Airgas.
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    Audio

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The consequences weren’t long coming. Just one day after the collapse of a $60-billion (€53-billion) merger between German industrial gases giant Linde and U.S. rival Praxair, the Munich-based firm has announced a major leadership shakeup.

Linde’s chief financial officer, Georg Denoke, will step down with immediate effect, while Chief Executive Wolfgang Büchele will not have his contract renewed when it runs out in May of 2017, the company said in a statement Tuesday.

The two men had been involved in a fierce leadership dispute at the top of the Munich-based firm, which insiders say may have impacted the merger talks. Mr. Denoke was said to be against the merger and had been accused by many within the company of disloyalty.

Insiders blame Mr. Büchele and Mr. Denoke for failing to set aside a major leadership dispute before the talks with Praxair began.

Mr. Büchele, who took over as chief executive in May 2014, told the company’s non-executive supervisory board in a crisis meeting in Munich on Tuesday that he would not be available for a second term at the helm, meaning he will step down at the end of April 2017.

In a statement, the supervisory board said they had accepted “with great regret” Mr. Büchele’s announcement. Sources however say his position had been tenuous at best in any case.

“It marks a break with the past, in a positive way. We’re only going to be looking forward from now on,” Wolfgang Reitzle, chairman of the supervisory board, told Handelsblatt. “The long smoldering conflict in management had hindered the company in its efficiency.”

Many members of the supervisory board, which has the power to hire and fire executives in Germany, were even more critical of the role played by finance chief Mr. Denoke and wanted him out immediately, according to company sources. He will be temporarily replaced by Sven Schneider, who currently leads the company’s finance division Linde Finance.

The $60-billion (€53-billion) merger between the world’s second- and third-largest industrial gases firms abruptly collapsed this week, ending Linde’s hopes of regaining the top spot in the industry. The two companies on Monday said the talks had stumbled over “governance issues.”

Sources at Linde told Handelsblatt that Praxair had essentially wanted to take executive control of the future joint company. The role of Linde’s Munich headquarters may also have come into play. Sources said the joint company was to be based in Europe – though not in Germany – while Praxair had sought to run much of the company out of its current headquarters in Connecticut.

Despite being a good business fit, Mr. Reitzle said a key challenge for the merger had been that relocating elements of the business to the United States would likely have brought a better market value, but was being resisted by many within the German firm.

“The core problem is: A company that is listed in the United States is typically valued 20-40 percent higher for the same performance. If you simply integrate Linde into Praxair, without synergies you would then get $12 billion more in market capitalization, and including synergies $20 billion,” Mr. Reitzle said.

“That creates a dilemma, since we at Linde had to account for the interests of a number of stakeholders,” he added.

Mr. Büchele, a long-time BASF executive, took over as Linde’s chief in May 2014 from popular predecessor Wolfgang Reitzle, who is now head of the supervisory board. That meant he had big shoes to fill from the outset.

People are likely to take a mixed view of his tenure, too, after two profit warnings, not to mention the loss of Linde’s status as the world’s largest industrial gases producer due to the merger of French and U.S. rivals Air Liquide and Airgas earlier this year.

Of Mr. Büchele’s time at the top, one prominent fund manager said he had little success to show. Company sources said that while supervisory board members respected him as a person, many believe that a better chief executive can be found.

The merger with Praxair aimed to power Linde back to pole position in the industry. But insiders blame Mr. Büchele and Mr. Denoke for failing to resolve their major leadership dispute before the talks with Praxair began. That may have also been why Praxair, whose chief executive Stephen Angel was to lead the joint company, sought more executive control.

Sources say the two Linde executives were involved in a shouting match in the company’s hallways after Linde issued a second profit warning in December 2015. Some had questioned whether the profit warning, which took the markets by surprise and sent the company’s stock price tumbling, was necessary.

Both men’s positions in the company were seen as vulnerable after that.

Linde’s share price has been largely stable over the past three years with Mr. Büchele at the helm. It fell more than 8 percent on Monday after news that the merger had failed. To steady the ship, Linde will have to find a replacement leadership team, and fast.

With the Praxair merger collapsed, Mr. Reitzle suggested Linde no longer has designed on becoming the world’s largest industrial gases firm – a position it lost to Air Liquide earlier this year.

“In those markets where we are active, we want to be number one if possible. But we don’t have to be the leader worldwide.”

 

Axel Höpner is Handelsblatt’s bureau chief in Munich. Christopher Cermak is an editor for Handelsblatt Global Edition in Berlin. To contact the authors: hoepner@handelsblatt.com and cermak@handelsblatt.com

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