Linde-Praxair asset sale narrows to strategic bidders - sources

By Arno Schuetze, Clara Denina and Harry Brumpton

FRANKFURT/LONDON/NEW YORK (Reuters) - Industrial gas companies Linde AG (LING.DE) and Praxair Inc (PX.N) have slashed the bidding pool for the more than $4 billion (£3 billion) worth of assets they are jointly selling in a move that will favour Japan's Taiyo Nippon Sanso Corp , people familiar with the matter said on Friday.

The sellers want strategic buyers for European operations, to help win antitrust approval for their planned $80 billion merger, said the people, who were not authorized to comment publicly on negotiations.

A joint bid by private equity fund CVC Capital Partners Ltd [CVC.UL] and gases company Messer Group GmbH may still be on the table, while private equity investors Carlyle Group LP (CG.O), Onex Corp (ONEX.TO) and Blackstone Group LP (BX.N) may only bid for the U.S. operations, two of the sources said.

Munich-based Linde and Danbury, Connecticut-based Praxair recently added Iberian and Italian operations to the European package in response to regulators' demands.

Final offers are due on Monday. The European operations could be valued at about 11 times their slightly over $400 million in annual earnings before interest, depreciation and amortisation (EBITDA), the sources said.

There is no certainty that Taiyo and CVC or Messer will bid and talks could still fall apart, the sources cautioned.

Praxair, Taiyo Nippon Sanso, Carlyle, Onex and Blackstone did not immediately respond to requests for comment. Linde and CVC declined to comment.

The European Commission, which decides on antitrust approval, typically prefers peer-to-peer mergers that create more globally competitive businesses. Private equity buyers are more likely to win approval if they provide financing but stay removed from day-to-day management, either by teaming with industry buyers or by sticking with existing management to run businesses.

Linde and Praxair, which supply a wide range of gases from oxygen to helium, agreed an all-share merger of equals a year ago to create a global leader to overtake France's Air Liquide SA (AIRP.PA), with revenue of almost $29 billion and 88,000 staff.

The two companies are preparing to sell assets with earnings before EBITDA of around $800 million and hope to complete the deal before an Oct. 24 deadline dictated by German financial market rules. Their merger still requires regulatory approval in the European Union and the United States.

The Financial Times reported this month that the EU commission outlined a formal "statement of objections" to the companies asking about competition issues related to production and distribution of gases.

The two companies announced plans to buy out minority shareholders to speed up approvals.

(The story was corrects the headline to "asset sale narrows" instead of "merger narrows")

(Additional reporting by Ludwig Burger in Frankfurt and Yun Chee Foo in Brussels; Editing by Lauren Tara LaCapra and David Gregorio)