German industrial gases group Linde and US suitor Praxair have agreed an outline for a $65 billion-plus merger, with the combined company to be run out of the US by Praxair's chief executive.
The agreement comes after Praxair provided new assurances to Linde over jobs and corporate governance in Germany, sources have said.
As part of the agreement on key aspects of the planned all-share merger, existing Linde and Praxair shareholders would each own about 50% of the combined company.
The merged group will target $1 billion in cost savings, the two companies said in a joint statement, although some analysts said that figure looked overly optimistic.
"The transaction would unite Linde's long-held leadership in technology with Praxair's efficient operating model," the companies said.
Alongside rivals Air Liquide and Air Products and Chemicals, Linde and Praxair are struggling with slower growth in demand from clients in the manufacturing, metals and energy industries.
That has already led to consolidation in the industrial gases sector with Air Liquide buying Airgas Inc for $13.4 billion.
Linde shareholders will receive 1.54 shares in the merged company for each of their shares, the two groups said. Praxair shareholders will get one share in the new holding company for each Praxair share.
The new entity, representing a combined $30 billion in 2015 revenues before competition sell-offs, will have a dual listing in New York and Frankfurt.
Praxair's previous approach for Linde failed in September partly because of disagreements over where to locate key activities and who would run the business.
The two sides have now agreed that Praxair chairman and CEO Steve Angel will become CEO, based at Praxair's current headquarters in Danbury, Connecticut.
Linde's supervisory board Chairman Wolfgang Reitzle, will take the role of chairman of the new group.
The company will be domiciled outside of Germany in a member state of the European Economic Area - which comprises the European Union as well as Iceland, Liechtenstein and Norway.
"Corporate functions would be appropriately split between Danbury, Connecticut and Munich, Germany to help achieve efficiencies for the combined company," Munich-based Linde and Praxair said in their statement.
Investment bankers have flagged possible divestments to ease competition concerns in the US and Brazil for Linde and in Germany for Praxair, making it difficult to achieve the cost cutting targets with a smaller revenue base.
Linde and Praxair declined to comment on possible divestments.
Praxair's finance chief Matthew White has previously made clear that cutbacks were the main driver behind its acquisition strategy, saying last month: "We buy on synergies, we're not going to buy on assumptions of growth."
