Linde plc — Q3 2018 Form 10-Q
Business context and period: Covers the quarter and nine months ended September 30, 2018, before the October 31 completion of the Praxair–Linde AG business combination. At quarter-end, Linde plc had conducted no material operating activities beyond those incidental to its formation and the transaction. These figures are not the operating results of the combined industrial-gases business; the filing directs readers to Praxair’s separate Q3 10-Q for its operating results.
Financial results and position
- Revenue: None reported. The company’s pre-combination statements reflect transaction and formation activity, not operating revenue.
- Expenses and loss: Q3 other expenses and operating loss were $4,553,926, versus $290,825 in Q3 2017. Nine-month expenses and operating loss were $9,397,039, versus $753,465 from April 18 through September 30, 2017. No income tax or net finance costs were reported. Basic and diluted loss per share was $182.16 for Q3 and $375.88 for the nine-month period.
- Cash flow: Nine-month operating cash outflow was $4,789,805; financing provided $4,812,761, principally through related-party debt. Cash increased $20,080 to $104,942. No investing cash flow was reported.
- Balance sheet: At September 30, assets were $8,929,551, including $104,942 cash and $8,824,609 of other assets, principally equity-issuance costs. Accrued liabilities were $6,164,855 and related-party debt was $13,916,212. Shareholders’ equity was negative $11,151,516.
- Margins and operating metrics: Not meaningful for this pre-combination entity; the filing provides no operating revenue or business-level margins.
Changes versus the comparable period
Transaction-related expenses and losses rose substantially year over year. Comparisons are limited: Linde plc was incorporated on April 18, 2017, so the prior-year nine-month figure covers only the period from incorporation to September 30, 2017. The increase reflects costs of the business combination, including accounting and advisory services, rather than a disclosed change in operating performance.
Outlook, risks, contingencies, and unusual items
- The October 31, 2018 combination closed after the reporting date. The company said the acquisition accounting, including purchase-price allocation and pro forma information, was incomplete; Praxair is the accounting acquirer. The first annual report was expected to include Praxair and Linde AG results consolidated from the acquisition date.
- The related-party cash-management facility had a €30 million limit, carried interest at one-month EUR LIBOR plus zero spread, and had $13,916,212 outstanding at quarter-end. It terminated on the business day after the combination closed. The filing states the financial statements were prepared on a going-concern basis taking this facility into account.
- Regulatory commitments require divestitures. Praxair agreed to sell most of its European businesses for €5.0 billion cash, subject to customary adjustments. Linde AG agreed to sell specified Americas businesses for €3.0 billion, subject to deductions and customary adjustments; related 2017 sales and EBITDA were €1.5 billion and €350 million. Additional commitments applied in the United States and certain Asian jurisdictions. Linde plc provided guarantees for obligations under the principal sale agreements.
- After quarter-end, Linde Intermediate Holding announced a proposed squeeze-out of remaining Linde AG shareholders, with stated cash compensation of €188.24 per share and approximately €2.8 billion aggregate consideration, subject to required approvals and registrations.
- Management identified risks including integration, achieving synergies, regulatory restrictions and divestitures, input costs, foreign exchange and interest rates, competition, litigation, and cyber and operational disruptions. Management reported no significant market risks during the period. No legal proceedings were listed in Part II.
Important facts for investors to verify
- Use Praxair’s Q3 2018 filing—not this shell-company report—to assess pre-combination operating performance.
- Review subsequent filings for final acquisition accounting, combined-company results, and integration and synergy disclosures.
- Track the timing, proceeds, adjustments, guarantees, and completion of required divestitures.
- Confirm the cash, debt, and funding effects of the Linde AG squeeze-out and the post-closing related-party financing arrangements.
- Interpret the unusually large losses and negative equity in context: this filing reports Linde plc’s transaction-related activity before the combination, not the combined group’s ongoing financial position.