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Air Products and Air Liquide Vaporize Their Bid for BOC

A takeover deal valued at more than $11 billion between three of the world's largest industrial gas producers collapsed Wednesday, after the companies failed to get the Federal Trade Commission to approve it.

Air Products and Chemicals (APD - Get Report) of the U.S. and the French gas maker Air Liquide SA abandoned their joint offer for the BOC Group (BOX) of Britain just two days before a May 12 deadline for the FTC to approve the deal, noting that the outlook for approval appeared grim.

The news vaporized BOC's shares. In afternoon trading Wednesday, American depositary receipts of the company were trading down 9 9/16, or 24%, at 30 7 /16. The shares had risen recently, jumping more than 19% in the last week and a half as investors remained optimistic that an agreement would be reached, but collapsed Wednesday when those hopes were dashed. Shares of Allentown, Pa.-based Air Products were up 7/8, or 3%, to 31 3/16. (Air Products and Chemicals finished up 7/8, or 3%, at 31 3/16.)

The companies, which make and distribute everything from elemental hydrogen and nitrogen to complex compounds for microchip manufacturers, had agreed to buy BOC in July 1999 after several months of bidding against one another for the company. They planned a complex scheme to carve up most of BOC among themselves, while divesting enough assets to please the FTC.

The original plan called for Air Products to pick up most of BOC's operations in Britain and Ireland, while Paris-based Air Liquide would take BOC's operations in Australia. BOC's Asian assets would be carved up equally between the two bidders, while the U.S. assets would be partially split up and the rest sold. The German engineering company Linde AG, which recently acquired Swedish gas producer Aga, was reportedly eager to pick up any U.S. assets for sale, according to press reports at the time.

In 11th-hour negotiations with the FTC in recent days, the bidders even suggested they might be willing to sell all of BOC's operations in the U.S., which includes more than 70 manufacturing sites and a vast truck, train and pipeline distribution network.

But even the notion of a full sale of BOC's U.S. assets did not appear to appease federal regulators, who felt that the deal would eliminate a major competitor in a sector that is already dominated by a small number of major players. Air Liquide, BOC and Air Products, along with U.S.-based Praxair (PX) and Linde control most of the world's gas market.

"During 10 months of discussions with the FTC, Air Products and Air Liquide made a number of comprehensive and practical proposals, including divestitures, which responded to the demands of the FTC," Air Liquide and Air Products said in a statement Wednesday. "Nevertheless, it has recently become clear that the FTC will not approve the offer by May 12, 2000."

Likewise, BOC said it is comfortable with the idea of continuing to operate on its own. "BOC has significantly restructured and reorganized over the past two years through a major program to improve productivity, position the company to achieve top-line growth, and develop its position as the world's No. 2 industrial gases company," it said in a statement.

A representative for Air Products was unavailable for comment, but the companies said that despite the demise of their planned acquisition, they would continue to pursue a potential FTC blessing for a deal, and could make a fresh offer for BOC.

"We are still very much interested in making a deal," said Remi Charachon, corporate communications director for Air Liquide. "But its unclear now how a new deal would be structured and priced, since the regulatory situation has changed so much since July 13."

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