By Georgina Prodhan and Alexander Hübner
LONDON/MUNICH (Reuters) - German industrial gases maker Linde (DE:LING) reported a 3 percent rise in third-quarter core profit, the high-end of forecasts, as a row brewed over the future of its engineering and healthcare units after a planned merger with Praxair (N:PX).
Linde and U.S. peer Praxair plan an $80 billion(£61.1 billion) all-share merger of equals to overtake France's Air Liquide (PA:AIRP) as global leader, but Praxair's higher profit margins have caused concern in Germany that Linde may be the weaker partner.
Linde's profits were lifted by cost savings but organic growth at its main gases division was just 2.6 percent, dragged down by its U.S. medical gases division, Lincare, and below Air Liquide's 4 percent and Praxair's 6 percent.
The profit margin at its gases division was 28.3 percent, compared with 32 percent for Praxair. The plant-engineering unit's margin was 9.2 percent.
Linde Chief Executive Aldo Belloni has said the engineering unit may be legally carved out after the merger but that Linde would still retain a majority.
Praxair's finance chief appeared to go further in remarks to investors last month reported by Deutsche Bank (DE:DBKGn), when he said U.S. healthcare and parts of plant engineering might not belong in the new group and there were "no sacred cows".
Praxair, outside of normal U.S. business hours, had no immediate comment on Deutsche Bank's account of CFO Matthew White's meeting with investors. White is set to become CFO of the combined group.
Linde said on Friday the two businesses would remain part of the group for the time being, and expressed irritation with White's reported comments, adding that White and Linde CFO Sven Schneider would soon meet to thrash out the matter.
"We haven't talked to Mr White but... Schneider is going to meet Mr White soon and surely we are going to challenge him about this statement in order to give him a chance to build up trust again," Belloni told a news conference.
GOOD NUMBERS
Linde's earnings before interest, tax, depreciation and amortisation (EBITDA) rose to 1.03 billion euros ($1.2 billion), versus the 1.02 billion expected on average by analysts in a Reuters poll.
Its shares rose 2.9 percent to the top of the German blue-chip DAX index (GDAXI) which was up 0.7 percent.
"Linde presented good Q3 numbers. We hope to get an update on the running (prolonged) tendering process in today's CC at 2:00 pm CET," Baader analyst Markus Mayer wrote in a note, keeping his "buy" recommendation on the stock.
Linde this week extended the acceptance period for conversion of its shares into shares of the new merged company by two weeks until Nov. 7, and lowered the minimum acceptance level to 60 percent from 75 percent.
It aims to reach 74 percent acceptance by Nov. 24, otherwise benefits for the tax inversion following the merger will not happen and the deal is likely to be called off. Belloni said on Friday 67.9 percent of shares had now been tendered.
Linde said it had secured anti-trust approval for the Praxair merger from four of the 24 necessary authorities: in Pakistan, Paraguay, Russia and Turkey, and was cooperating closely with all the other competition authorities.
Reuters reported this week that the companies were preparing to sell assets with core earnings of 650 million-750 million euros and an enterprise value of about 6.5 million-7.5 billion.
The assets up for sale have combined sales of more than 2.7 billion euros, the bulk of which are in the United States.