Linde to buy Lincare for $4.6B

Friday, June 29, 2012

CLEARWATER, Fla. – Linde of Germany has offered to buy Lincare for $4.6 billion in a friendly takeover that the provider's board has unanimously approved, according to news reports.

Linde will offer a reported $41.50 per share for Lincare, which has a market capitalization of $2.69 billion—more than Air Liquide of France and an unnamed private equity firm that were also rumored to be bidding, according to news reports.

"It's not exactly a surprising move in that Linde and Air Liquide both understand the gases business well and could utilize Lincare as a large platform to grow in the distribution/services and homecare sectors," said Gregg Wappett, an associate with Boston-based Provident Healthcare Partners. "It would help offset some slowed growth in other verticals for the two companies."

That’s a big reason why industry analysts believe Linde probably came knocking on Lincare’s door instead of vice versa.

It's not the first time gas companies have been interested in the U.S. home oxygen market. Air Products and Praxair both made attempts at the market, as did Air Liquide on a much smaller scale. What keeps them interested?

"I do think the higher margins of home care appeal to all of these industrial gas players,” said Rick Glass, president of Tarpon Springs, Fla.-based Steven Richards & Associates.

It certainly seems to appeal to Linde, which already has a large healthcare division in Europe. Earlier this year, it acquired Air Products' European homecare business for a reported $749.9 million.

Another potential attraction for Linde and other buyers: industry turmoil due to competitive bidding and other reimbursement challenges, say analysts.

"They feel like in these situations there are winners and losers," said Jonathan Sadock, managing partner with Philadelphia-based Paragon Ventures. "By consolidating and managing, and putting sound business practices in play, they feel they can emerge as one of the winners."

Analysts say a Lincare deal could have a ripple effect on M&A activity in the industry. 

"I would think that whoever doesn't get Lincare is going to look for some other company to buy," said Don Davis, a financial consultant with Duckridge Advisors.

Lincare's stock prices rose 23.4% to $31.17 on June 27 on news of the possible buyout.