Linde AG

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Linde AG

Abraham Lincoln Strasse 21
65189 Wiesbaden
Germany
Telephone: +49-611-770-0
Fax: +49-611-770-269
Web site: http://www.linde.de

Public Company
Incorporated: 1879 as Gesellschaft für Linde's Eismaschinen
Employees: 46,662
Sales: $11.28 billion (2003)
Stock Exchanges: German OTC
Ticker Symbol: LIN; LNAGF
NAIC: 237990 Other Heavy and Civil Engineering Construction; 325120 Industrial Gas Manufacturing; 325188 All Other Inorganic Chemical Manufacturing; 333924 Industrial Truck, Tractor, Trailer, and Stacker Machinery Manufacturing; 333994 Industrial Process Furnace and Oven Manufacturing; 336111 Automobile Manufacturing; 541330 Engineering Services; 551112 Offices of Other Holding Companies

Linde AG, an international technology company, operates in two business segments: Gas and Engineering and Materials Handling. The company produces industrial and medical gases, develops plants for gas production, and is one of the biggest manufacturers of industrial trucks in the world. In 2004, Linde exited the refrigeration business, in which it had been Europe's market leader.

A Century of Business: 1875–1985

Carl von Linde invented his refrigeration machine in 1875, and formed his own company four years later. For the next 100-plus years, Linde AG was involved in a wide variety of engineering endeavors, from manufacturing refrigeration and air conditioning systems to the production of rare gases and the construction of an array of industrial plants.

Linde was born in Berndorf on June 11, 1842. He became professor of mechanical engineering at the College of Technology in Munich at the age of 26 and retained that position until he was 68. Linde made the most of his time spent at the school and undertook research in the areas of refrigeration and air and gas liquefaction processes. For the first ten years of his company's existence, Linde took a sabbatical from teaching and was its sole director. After the firm was well on its way to success, however, Linde returned and directed its operations from the college. He died on November 16, 1934.

By the mid-1980s, Linde consisted of four divisions managed by the executive board of directors in Wiesbaden: the refrigeration and shop equipment division; the industrial gases division; the process plant engineering and construction division; and the hydraulic and materials handling equipment division. The divisional breakdown of the company did not formally occur until 1972, but those operations traditionally followed separate paths of development.

Linde's first scientific breakthrough, which occurred in 1875, was an ammonia compression machine used for manufacturing ice. Four years later, Linde founded Gesellschaft für Linde's Eismaschinen. Initially, orders for refrigeration machines were "almost distressingly slow." Looking for possible business alternatives, his solution was to engineer and supply ice factories in which his refrigeration machines would be installed. By 1890, over 700 of his machines were employed in 445 breweries across Western Europe.

Soon thereafter, the company changed its emphasis from planning ice factories to building and operating cold stores. Linde cofounded Gesellschaft für Markt-und Kühlhallen in Berlin to use his refrigeration technology and expand the cold stores operations. Yet, for over 50 years, even though other firms purchased Linde's refrigeration systems, and most of the company's ice factories had been sold, the cold storage operations were never a financial success. As a result, Linde sold all of its holdings in that area during 1982 and 1983.

It was only after 1920 that the company's sales of refrigeration equipment skyrocketed, due primarily to the acquisition of two major competitors. Industriegas GmbH, located in Mannheim, designed oxygen generators. The value of the purchase for Linde, however, was in the Industriegas subsidiary, Maschinenfabrik Sürth. Sürth, situated near Cologne, was well-known as the first German company to manufacture transportation containers for compressed and liquefied gases, and also for the production of various components for refrigeration units. The second significant acquisition was Kulmöbelwerk G.H. Walb and Company of Mainz-Kostheim, a manufacturer of large commercial items such as refrigerated grocery counters.

After their assimilation by Linde, and throughout the 1930s, the Sürth works built components and systems units for commercial refrigeration, while G.H. Walb made smaller units and domestic products. Commercial production continued through World War II, although these plants were required to provide mining and compression units to the armed forces. Near the end of the war, both the Sürth and the G.H. Walb works were entirely destroyed. By 1949, however, a new machine shop had been built at the Sürth facility, and by 1960 the operation had been completely reconstructed. Soon afterwards, Linde established its entire refrigeration engineering department at this factory. The branches at Sürth and G.H. Walb were then combined in 1964 to form the refrigeration and shop equipment division of the 1980s.

Carl von Linde's 1895 invention for producing liquid air led to the growth of the TVT München division of process plant engineering and construction. In addition, his related research with other rare gases laid the groundwork for what became the industrial gases division. The separation of these divisions was more for administrative purposes than for anything else, since their operations significantly overlapped.

Linde's initial plan was systematically to improve the design and production of air liquefiers, and he devoted much of his time in Munich to the development of new gas liquefaction processes. During 1903, the company built the first production plant for purified oxygen and successfully produced pure nitrogen. Linde also built the first double-column rectifier, which allowed pure oxygen and nitrogen to be produced in the same apparatus without using any extra energy; this breakthrough occurred in 1912.

During this time, Linde also built gas production plants in Düsseldorf, Mülheim, Nürnberg, and Dresden. Expanding throughout Europe, the company built plants in Antwerp, Tou-louse, Paris, Barcelona, Stockholm, Vienna, and London. In 1907 Linde established the Linde Air Products Company in Cleveland, Ohio. (This plant was extremely successful; eventually acquired by Union Carbide, and known as the Linde division in the mid-1980s.)

Until World War II, Linde was deeply involved in expanding its existing plants. During the war, however, both the plant engineering and construction and industrial gases facilities within Germany were heavily damaged; as a result, they had difficulty re-establishing their operations both at home and abroad. However, the economic prosperity in West Germany during the late 1950s and early 1960s led to a rise in domestic demand for liquid oxygen and nitrogen, and contracts with former partners overseas were also renewed.

Linde built the world's first heavy water nuclear energy plant in 1955 and the first system to separate radioactive elements from nuclear reactor gases in 1959. It also constructed, in 1964, the world's largest air separation unit in West Germany; two years later the company built the world's largest ammonia-synthesis plant in the United States; in 1970, it devised Europe's most extensive helium refrigeration system.

The Güldner Aschaffenburg division had its beginnings very early in the century when Linde needed engines to drive the refrigeration machines his firm was manufacturing. He formed a partnership with Dr. Hugo Güldner, a chief design engineer, and Dr. Georg von Krauss, a locomotive manufacturer. The first diesel engines were built at the Güldner works in 1907; by this time, Linde controlled the majority of company stock.

During World War I, the factory was retooled entirely for the war effort, manufacturing iron shells, motor vehicles and aircraft engines. The company recovered quickly in the 1920s, and expanded its product line to include engines for agricultural equipment and components for the repair of locomotives, railcars, and boats. The Güldner facilities were taken over completely by Linde in 1929 and thereafter concentrated on producing small diesel engines and tractors.

The plant in Aschaffenburg was totally destroyed during an Allied air raid in World War II, but the works were fully functional once again by 1950. A new era for the company began in 1955 with the production of the Hydrocar, a platform truck with hydrostatic transmission. Linde then acquired the hydraulics department of Gusswerk Paul Saalmann & Sohne in 1958. By 1969, the Aschaffenburg factory discontinued the production of tractors and diesel engines and concentrated entirely on forklift trucks and hydraulic equipment. Acquisitions followed. Linde purchased a Hamburg-based company in 1973. Then the company looked outside its borders, acquiring the majority share of an American Company in 1977 and taking over France's largest forklift manufacturer in 1984.

A number of important developments occurred during the first half of the 1980s. The refrigeration and shop equipment division designed its units for energy conservation as well as individually customizing them to match contemporary store styles throughout the world. The product line covered a comprehensive selection of refrigerated and freezer display cases, refrigeration systems, and energy monitoring and control systems. Besides the impressive growth in orders from Arab countries, industrial users, whose needs ranged from switchgears and transformers to computer rooms and brewery storage, also contributed to increased profits for Linde.

Company Perspectives:

Carl von Linde was an innovative engineer who made valuable contributions to the science of refrigeration with both theoretical studies and practical developments. His achievements laid the foundation not only for Linde AG, but an entirely new industry.

Much of the innovative research in the utilization of wastewater and sewage was conducted at Linde's process plant engineering and construction division. The new techniques it developed during the beginning of the 1980s included the highly economical DS process for storing and utilizing sewage sludge and the Laran process for anaerobic decomposition of contaminated wastewaters. Additional environmental protection research was conducted in the purification of flue gases, including the mechanism known as smokestack "scrubbers."

The industrial gases division maintained a strong market position: stricter environmental protection measures in many countries led to increased use of oxygen in the steel industry, at foundries, and in the manufacture of electrodes; the wastewater purification field grew sizably in the past decade; and demand for high-purity gases increased dramatically in the semiconductor and glass-fiber industries.

The improvement in the Güldner Aschaffenburg division's sales, due largely to new drive and transmission systems which had been developed in recent years, had been mostly in the form of exports to foreign companies manufacturing agricultural and construction equipment. In addition, in 1985 this division also produced a small, three-ton capacity, forklift truck which helped to increase sales. However, continued growth in this area was limited due to competition, lower prices, and a worldwide overcapacity.

The breakdown of division size in terms of sales during the mid-1980s was refrigeration and shop equipment, 19 percent; process plant engineering and construction, 25 percent; industrial gases, 21 percent; and hydraulics and materials handling, 35 percent. Linde's long-term goals were to increase inventory turnover, maintain nearly full employment of its facilities, and retain the company's reputation as a world leader in the construction industry.

Gas on the Rise: The Mid-1980s to 2000

During the late 1980s, faced with an increasingly competitive environment for its refrigeration business, Linde implemented plant modernization. Its materials handling business received a boost through the purchase of Lansing in Great Britain, in 1989.

In 1991, Linde ranked 334th in sales among the world's industrial companies, with sales of $4.17 billion and profits of $147 million. The opening of relations between East and West had afforded business opportunities for Linde. Plant construction took place in the former Soviet Union, Eastern Germany, Poland, and Romania. Plants were also established in China. To the west, Linde expanded its U.S. operations.

Despite the global reach, in 1997, the Economist wrote of Linde, it is "Old Germany: a conglomerate that makes machine tools, gases, fork-lifts and refrigeration equipment." Viewed as a producer of some of the world's best products, it was seen as reticent to make revelations about itself to those beyond its borders. This despite half of its production was done outside Germany and nearly two-thirds of its $5 billion in sales were international. Top officers were engineers who focused on product above all else.

A build-up of its gas business during the late 1990s came via acquisitions and culminated with the purchase of Sweden-based AGA AB in early 2000. Established in 1904, AGA had for much of its history been a diversified company. International competition forced change, and the company limited itself to the gas business beginning in the 1980s. In 1999, AGA held a strong market position in Europe and North and South America. Its sales volume was EUR 1.6 billion. Employees numbered 9,500.

The acquisition resulted in the formation of the second largest industrial gas group in Europe, holding about one-quarter of the market. The AGA purchase also boosted Linde's Latin American market share of industrial gases to 20 percent.

According to an April 2002 Chemical Week article, Linde ranked fourth among major worldwide industrial gas producers, tied with Air Products and Chemicals, and behind Air Liquide, BOC, and Praxair.

"The Aga deal represents a substantial expansion of Linde's business, but it is much smaller than the very ambitious plans that the company was negotiating in 1999 and early 2000. Linde had hoped to take control of fellow German gases group Messer, and it was also poised to acquire most of BOC's U.S. gases business that Air Liquide and Air Products were expected to divest to win regulatory approval for their proposed joint takeover of BOC. Antitrust concerns had sunk all these deals except Aga by mid-2000," wrote Natasha Alperowicz and David Hunter for Chemical Week.

Growing Niches: 2001–04

The $3.8 billion price tag for AGA put a hold on any large acquisitions by Linde for the next few years. Chemical Week reported the company would concentrate on reducing debt and increasing sales in the high-growth markets of healthcare and hydrogen production.

Key Dates:

1875:: Carl von Linde invents an ammonia compression machine used to manufacture ice.
1879:: Gesellschaft für Linde's Eismaschinen is founded.
1903:: Company builds first production plant for purified oxygen.
1912:: Company constructs device to simultaneously produce oxygen and nitrogen.
1914:: Manufacturing is altered due to World War I.
1920:: Acquisition of competitors elevates refrigeration business.
1945:: Company sustains heavy damage during World War II.
1955:: Linde begins Hydrocar production.
1959:: Company builds first system to separate radioactive elements from nuclear gases.
1969:: Linde stops tractor production to concentrate on forklifts.
1979:: Linde marks 100th anniversary.
2000:: Company buys AGA AB, becoming Europe's second largest industrial gas group.
2004:: Company exits refrigeration business.

Linde's healthcare operation was its fastest growing business, with the majority of sales to hospitals (56 percent) and home respiratory services (28 percent). But Linde's inhaled nitrogen oxide (INO) business, begun in 2001 in the United States, for the treatment of newborns with respiratory problems, was skyrocketing. Hydrogen sales to the refining and petrochemical industry were on the upswing. The company was solidly positioned in the growing hydrogen vehicle fuel market as well.

Linde was challenged by the economic conditions in Europe during 2003. In light of this, the company focused on internal improvements while extending itself further out into the global marketplace.

In the spring of 2004, Linde sold its refrigeration business to the U.S.-based Carrier Corporation. The deal closed in September 2004, bringing to an end the business line on which it was founded. The sale freed up Linde to focus on the future of Gas and Engineering and Material Handling, both profitable and world leading business segments.

Principal Subsidiaries

Linde Gas Austria; Linde Gas Pty. Ltd.; Linde Gas Brazil; PanGas; Linde Gas Columbia; Linde Technoplyn; AGA Linde HealthCare GmbH & Co. KG; Tega-Technische Gase und Gasetechnik GmbH; Linde Gas Denmark; Abello Linde Spain; Linde Gas France; Linde Gas Finland; Linde Gas Great Britain (U.K.); Linde Gas Ungarn AG; Linde Gas Italy; Linde Gas Mexico; Linde Gas Norway; Linde Gas Poland; Linde Gas Puerto Rico; AGA S.A.; Linde Gas Chile; Linde Gas Romania; AGA AB; Linde Gas USA; AGA Gas C.A.; Linde Kyrotechnik AG; Linde-KCA-Dresden GmbH; Selas-Linde GmbH; Societe of Application des Techniques Linde S.A.R.L.; Linde Impianti Italia S.p.A. (Italy); Linde Engineering USA; Linde Fordeertechnik GmbH; Linde Material Handling Pty. Ltd.; Linde Lansing Fordertechnik AG; Linde Xiamen Gabelstaplergesellschaft mbH; Linde Material Handling Czech Republic; Linde Material Handling Iberica, S.A.; Fenwick-Linde France; Linde Material Handling Great Britain (U.K.); Linde Guldner Italiana S.p.A. (Italy); Linde Milenz Truck A.B.; Linde Lift Truck Corporation; STILL GmbH.