Business context and reporting period
Linde plc’s 2017 Form 10-K covers its formation-period financial results from April 18 through December 31, 2017, including the quarter ended December 31, 2017. The filing was signed March 23, 2018. Linde plc was formed to serve as the holding company for the proposed all-stock combination of Praxair and Linde AG; it had conducted no material operating activities. Accordingly, these figures are not the operating results of Praxair, Linde AG, or the proposed combined business.
The merger and exchange offer were still pending. Praxair shareholders had approved the merger, and approximately 92% of voting-eligible Linde AG shares had been tendered. Completion was expected in the second half of 2018, subject to regulatory approvals.
Financial results and position
| Metric | Result |
|---|---|
| Revenue | None reported; the filing describes no material operating activity. |
| Expenses and operating/net loss, Apr. 18–Dec. 31 | $1.883 million; no finance costs or income tax reported. |
| Q4 expenses and net loss | $1.129 million. |
| Total comprehensive loss, Apr. 18–Dec. 31 | $1.925 million, including $42,828 of other comprehensive loss. |
| Basic and diluted loss per share | $75.31 for the formation period; $45.17 for Q4. |
| Operating cash flow | $(34,798) for the formation period; no investing cash flow. |
| Financing cash flow and year-end cash | $118,140 financing inflow; $84,862 cash at year-end. |
| Total assets | $9.214 million, comprising $84,862 cash and $9.130 million of other assets. |
| Current liabilities | $11.146 million: $1.645 million accrued liabilities and $9.501 million related-party debt. |
| Equity and liquidity | $(1.932) million shareholders’ equity and approximately $(1.932) million working capital. |
Margins are not meaningful because the filing reports no revenue. The $9.130 million of other assets primarily represents equity-issuance costs; the company expected to reclassify them to additional paid-in capital if the transaction closed, or expense them if it did not.
Material changes versus the prior comparable period
No comparable prior-year operating period exists: the company was incorporated in April 2017. In the unaudited quarterly data, Q4 loss was $1.129 million, versus $290,825 in Q3 and $462,640 in the period from incorporation through June 30. The filing attributes the company’s expenses primarily to transaction-related accounting and advisory services and registration costs.
Outlook, risks and unusual items
- The company’s outlook depended on completing the Praxair–Linde combination; the filing provides no standalone operating or earnings guidance, and no quantified synergy target.
- Required regulatory approvals remained outstanding, including an EU Phase II review and U.S. FTC process. Approval conditions could require divestitures or other commitments, reduce expected benefits, delay closing, or prevent completion. The agreement could terminate if required approvals were not obtained by October 24, 2018.
- The company identified integration, transaction-cost, customer and employee retention, litigation, credit-rating, tax-residency and tax-law risks. It also cautioned that expected synergies and cost savings might not be achieved.
- A €30 million related-party cash-management facility with Praxair International Finance UC carried a variable rate of one-month EUR LIBOR plus 0%; $9.501 million was outstanding at year-end. It was to terminate at the earlier of termination of the combination agreement or the business day after closing.
- Linde plc had no public trading market and had paid no dividends. Although it expected to pay dividends after the combination, payment depended on board discretion, subsidiary distributions, legal limits and the creation of distributable reserves.
- The company reported no pending legal proceedings or off-balance-sheet arrangements, and no long-term debt or other long-term obligations at year-end. Its financial statements received an unqualified audit opinion.
Important facts for investors to verify
- Whether and when the combination closed, and the final regulatory conditions, required divestitures and transaction costs.
- That this 10-K reports only Linde plc’s formation and transaction costs; review Praxair’s and Linde AG’s filings for operating performance, cash flow, debt and liquidity.
- The treatment and recoverability of the $9.130 million of capitalized equity-issuance costs if the transaction did not close.
- The outstanding related-party facility balance, terms and repayment status, as well as the company’s negative working capital and equity at year-end.
- The combined group’s eventual dividend policy and Linde plc’s ability to establish legally distributable reserves.