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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS
INDEX TO THE FINANCIAL STATEMENTS MESSER GRIESHEIM HOLDING AG
INDEX TO UNAUDITED FINANCIAL STATEMENTS SINGAPORE SYNGAS PTE LTD.
INDEX TO FINANCIAL STATEMENTS SINGAPORE SYNGAS PTE LTD.

As filed with the Securities and Exchange Commission on April 30, 2002

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 2001

Commission file number 333-73020

Messer Griesheim Holding AG
(Exact name of registrant as specified in its Charter)

        FEDERAL REPUBLIC OF GERMANY
(Jurisdiction of incorporation or organization)

KOOGSTRAAT 10, 25870-NORDERFRIEDRICHSKOOG GERMANY
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
€550,000,000
10.375% Senior Notes due 2011
(Title of Class)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý    No o

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o    Item 18 ý

TABLE OF CONTENTS

INTRODUCTION AND USE OF CERTAIN TERMS

        In this Form 20-F:

•

"Messer Holding", "the Company", "we", "us" and "our" refers to Messer Griesheim Holding AG and, unless the context otherwise requires, its consolidated subsidiaries;



•

"Messer Griesheim" refers to the Messer Griesheim Holding AG's subsidiary, Messer Griesheim GmbH, which is the operating company whose business and results of operations are described in this Form 20-F, including, unless the context otherwise requires, its consolidated subsidiaries;



•

"Messer Griesheim Group" and "the Group" refer to the parent of Messer Griesheim Holding AG, Messer Griesheim Group GmbH & Co. KGaA, a German Partnership limited by shares, or Messer Griesheim Group GmbH prior to its conversion on November 1, 2001 to Messer Griesheim Group GmbH & Co. KGaA;



•

"Messer Industrie" refers to Messer Industrie GmbH, a holding company for the Messer family's minority interest in Messer Griesheim Group; and



•

"MGB" refers to Messer Griesheim Beteiligungsverwaltungs GmbH, which is the general partner of Messer Griesheim Group.



•

Messer Employee GmbH refers to Messer Employee GmbH & Co. KG, a company through which employees participating in our share purchase and option plan are to hold shares in Messer Griesheim Group.

CURRENCY PRESENTATION

        In this Form 20-F:

•

"DM" means Deutsche Mark;



•

"€" and "euros" mean the single currency of the participating Member States in the Third Stage of European Economic and Monetary Union of the Treaty Establishing the European Community, as amended from time to time; and



•

"$" and "dollars" mean U.S. dollars.

        On January 1, 2000, we adopted the euro as our reporting currency and translated all amounts previously denominated in Deutsche Mark (DM) at the fixed exchange rate of €1.00=DM 1.95583, applicable since January 1, 1999, for all prior periods presented.

        We furnish to holders of our senior notes reports that include a description of operations and annual audited consolidated financial statements prepared in accordance with International Accounting Standards ("IAS"), which differs in certain significant respects from Generally Accepted Accounting Principles in the U.S. ("U.S. GAAP"). See Item 18. "Financial Statements—Note 40" for a description of the significant differences between IAS and U.S. GAAP. The financial statements included in the annual reports are examined and reported upon by Messers' independent auditors. We also furnish holders of our senior notes with an yearly update of our exchange offer prospectus and with unaudited quarterly consolidated financial statements prepared in conformity with IAS with a reconciliation to U.S. GAAP.

ENFORCEABILITY OF CIVIL LIABILITIES

        Messer Holding is a stock corporation organized under the laws of the Federal Republic of Germany. Most of our management board and supervisory board members and executive officers reside outside the United States. All or a substantial portion of our assets and most of our management board and supervisory board members also are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or such persons with respect to matters arising under the United States federal securities laws or to enforce against us or such persons located outside the United States judgments of United States courts predicated upon the civil liability provisions of the United States federal securities laws.

FINANCIAL STATEMENT PRESENTATION

        Messer Holding was a dormant company which was activated to become a holding company for Messer Griesheim's shares in connection with the acquisition transactions described in this Form 20-F. Messer Holding has no material assets or sources of revenue other than its shares in Messer Griesheim, which have been pledged to Messer Griesheim's senior lenders as security, and an intercompany loan to Messer Griesheim.

        Accordingly, this Form 20-F includes:

•

audited consolidated financial statements of Messer Griesheim as of December 31, 1999 and 2000 and for the years ended December 31, 1999 and 2000 and as of April 30, 2001 and for the four months ended April 30, 2001;



•

audited consolidated financial statements of Messer Holding as of and for the eight months ended December 31, 2001; and



•

audited financial statements of Singapore Syngas Pte Ltd as of December 31, 2000 and for the year ended December 31, 2000 and unaudited financial statements of Singapore Syngas Pte Ltd as of December 31, 2001 and 1999 and for the year ended December 31, 2001 and the two years ended December 31, 1999.

        Both Messer Griesheim's and Messer Holding's financial statements are prepared in accordance with International Accounting Standards as adopted by the International Accounting Standards Board (formerly known as the International Accounting Standards Committee), or IAS. IAS differ in certain significant respects from generally accepted accounting principles in the United States and certain other countries. Material differences between IAS and generally accepted accounting principles in the United States, or U.S. GAAP, that affect our financial statements, are discussed in note 40 to Messer Holding's consolidated financial statements contained in this prospectus.

        Singapore Syngas Pte Ltd's financial statements are prepared in accordance with Singapore generally accepting accounting principles, or SGAAP. SGAAP differ in certain respects from International Accounting Standards of the International Accounting Standards Committee. Material differences between SGAAP and IAS that affect the financial statements of Singapore Syngas Pte Ltd are discussed in Note 20 and 22 to the Singapore Syngas Pte Ltd financial statements contained in this prospectus. IAS differ in certain respects from generally accepted accounting principles in the United States. Material differences between IAS and U.S. GAAP that affect the financial statements of Singapore Syngas Pte Ltd are discussed in Note 21 and 23 to the Singapore Syngas Pte Ltd financial statements contained in this Form 20-F.

MARKET AND INDUSTRY DATA

        Information or other statements presented in this Form 20-F regarding market share and industry data relating to our business were obtained from industry publications and other publicly available publications. Although Messer Holding believes that this information is reliable, Messer Holding cannot guarantee the accuracy or completeness of the information neither has Messer Holding independently verified it. Unless the context indicates otherwise, all market and industry data is for the calendar year 2001.

FORWARD-LOOKING STATEMENTS

        This Form 20-F includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our expectations are based on reasonable assumptions, we cannot assure you that actual results will not be materially different from our expectations. Factors that could cause our actual results to differ materially from our expectations include, among other things:

•

the amount of proceeds that we realize from our divestiture program;



•

the timing of the receipt of proceeds that we realize from our divestiture program;



•

the amount of savings in operational costs that Messer Griesheim is able to achieve as a result of its cost-savings program;



•

the costs of implementing Messer Griesheim's cost-savings program;



•

the timing to achieve benefits of our cost-savings program;



•

anticipated trends and conditions in our industry, including regulatory developments;



•

our capital needs; and



•

our ability to compete.

        We are under no obligation to update or revise publicly any forward-looking statement. The forward-looking events discussed in this Form 20-F might not happen. In addition, you should not interpret statements regarding past trends or activities as promises that those trends or activities will continue in the future. All written, oral and electronic forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement. Some numbers that appear in this Form 20-F (including percentage amounts) have been rounded. Numbers in tables may not sum precisely to the totals shown due to rounding.

NORMALIZED EBITDA

        The Company calculates normalized EBITDA as operating profit before depreciation and amortization, after adding back charges for impairment of intangible assets and property, plant and equipment, restructuring and reorganization charges.

        Normalized EBITDA is not a measure recognized by IAS or U.S. GAAP. This and similar measures are used by different companies for differing purposes and are often calculated in ways that reflect the unique situations of those companies. We urge you to be very cautious in comparing our normalized EBITDA data to the EBITDA data of other companies. Normalized EBITDA is not a substitute for operating profit as a measure of operating results. Likewise, normalized EBITDA is not a substitute for cash flow as a measure of liquidity.

PART I

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

        Not applicable.

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

        Not applicable.

ITEM 3.    KEY INFORMATION

3.A SELECTED FINANCIAL DATA

        The following selected financial data for the eight month period ended December 31, 2001 has been derived from Messer Holding and Messer Griesheim's audited consolidated financial statements. The selected financial data as of and for the four month period ended April 30, 2001 is derived from Messer Griesheim's revised consolidated financial statements that were audited by KPMG Deutsche Treuhand—Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, independent accountants, whose report thereon is based in part upon the report of other auditors. The selected financial data for the years ended December 31, 1999 and 1998 is derived from Messer Griesheim's revised consolidated financial statements which were audited by PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, independent accountants. Consolidated balance sheets at December 31, 2001, April 30, 2001 and December 31, 2000 and the related consolidated statements of operations and of cash flows for the eight months ended December 31, 2001, for the four months ended April 30, 2001 and the two years ended December 31, 2000 and notes thereto appear elsewhere in this Form 20-F. The summary financial data as of and for the year ended December 31, 1997 have been revised to reflect the accounting principles that we applied for 2000, 1999 and 1998.

        On April 30, 2001, a series of acquisition transactions were consummated as described elsewhere in this Form 20-F which resulted in a change in the ownership of Messer Griesheim and Messer Holding. The acquisition transactions have been accounted for in a manner similar to a "purchase" business combination and, accordingly, the cost of the acquisition has been allocated to the assets acquired and liabilities assumed, including those to be disposed of under our divestiture program described elsewhere in this Form 20-F, based on their estimated fair values as of April 30, 2001, the acquisition date. The resulting excess of such cost over the fair value of the net assets acquired is accounted for as goodwill. In connection with the acquisition transactions, substantially all of Messer Griesheim's existing indebtedness was refinanced (the "refinancing program"). Additionally, following the acquisition transactions, Messer Griesheim adopted in May 2001 a divestiture program pursuant to which it intends to sell substantially all of the assets and operations in its non-core markets, located in Asia, Africa and Latin America, as well as certain non-strategic assets and operations in its core markets. Other than the joint ventures in China described in Item 4. "Information on the Company—4.A History and Development of Messer Griesheim and Messer Holding", we intend to complete these divestitures by the end of calendar year 2002.

        Consideration should be given to the effects of the acquisition transactions, the refinancing program, and the divestiture program when comparing historical financial information, including the selected financial data, for periods prior to April 30, 2001 to periods thereafter. To make this clear, financial information for periods prior to and subsequent to the acquisition transactions have been separated in the following table by inserting a solid vertical line between the columns for such periods.

        Both Messer Griesheim and Messer Holding prepare their financial statements in accordance with IAS, which differs in certain significant respects from U.S. GAAP. The principal differences between IAS and U.S. GAAP applicable to the historical financial statements are summarized in note 40 of Messer Holding's audited consolidated financial statements. This data should be read together with the financial statements and related notes and Item 5. "Operating and Financial Review and Prospects" included elsewhere in this Form 20-F.

        Messer Holding has no material assets or sources of revenue other than its shares in Messer Griesheim, which have been pledged to Messer Griesheim's senior lenders as security, and an intercompany loan of €550 million to Messer Griesheim.

(1)

On January 1, 2000, Messer Griesheim adopted the euro as its reporting currency and translated all amounts previously denominated in Deutsche Mark, or DM, to euros at the fixed exchange rate of €1.00 = DM1.95583, which is the official rate applicable since January 1, 1999 for all periods presented. Messer Griesheim's consolidated financial statements reported in euro depict the same trends as would have been presented if it had continued to present its consolidated financial statements in DM. Messer Griesheim's consolidated financial statements will, however, not be comparable to the euro financial statements of other companies that reported their financial information in a currency other than DM prior to January 1, 1999.

(2)

Selected financial data for all historical periods is derived from the historical financial statements, which were audited or unaudited as indicated in the introduction preceding this information.

(3)

Cash flow information for 1997 was not reclassified for the discontinued cutting and welding operations. See note 14 to Messer Griesheim's audited financial statements for additional information relating to 1998 and 1999 cash flows of discontinuing operations.

(4)

Includes cash outlays for property, plant and equipment and intangible assets and purchases of investments and loans to related parties. The investments and loans to related parties in 1997 include the cutting and welding business, as the financial data for 1997 do not reflect the full effect of this business as discontinued operations. We believe that the investments in cutting and welding business accounted for no more than €1 million in 1997.

(5)

IAS differs in certain material respects from U.S. GAAP. See note 40 to the audited financial statements of Messer Griesheim included in Item 18 for an explanation of these differences.

(6)

Income (loss) from discontinuing operations and gain (loss) from disposal of discontinuing operations are comparable under IAS and U.S. GAAP for the years ended December 31, 1999 and 2000 and the four months ended April 30, 2001. For a description of the different treatment under IAS and U.S. GAAP of discontinuing operations during the eight month period ended December 31, 2001, see note 40 to our consolidated financial statements.

(7)

Calculated as operating profit before depreciation and amortization, after adding back charges for impairment of intangible assets and property, plant and equipment, restructuring and reorganization charges. Normalized EBITDA is not a measure recognized by IAS or U.S. GAAP and may not be comparable to similar measures presented by our competitors.

(8)

For the purpose of the calculation of the ratio of earnings to fixed charges:

•

Fixed charges consist of interest costs, both expensed and capitalized, plus discounts and capitalized expenses related to indebtedness plus one-third of rental expenses, which is the portion that we deem to be representative of the interest included in rental expenses, together with equivalent expenses relating to asserted and probable claims under guarantees of debt of non-consolidated investments.

•

Earnings consist of income (loss) from continuing operations before minority interests, fixed charges, amortization of capitalized interest, income (loss) of equity method investees, distributed income of non-consolidated investments and our share of pre-tax losses arising from guarantees of non-consolidated investments that are included in fixed charges. This total is reduced by the aggregate of interest capitalized and minority interest in pre-tax income of subsidiaries that have not incurred fixed charges.

•

For the eight months ended December 31, 2001, earnings were inadequate to cover fixed charges by €76 million under IAS and €72 million under U.S. GAAP. For the year ended December 31, 2000, earnings were inadequate to cover fixed charges by €111 million under IAS and €73 million under U.S. GAAP.

3.B CAPITALIZATION AND INDEBTEDNESS

        Not applicable.

3.C REASONS FOR THE OFFER AND USE OF PROCEEDS

        Not applicable.

3.D RISK FACTORS

        You should carefully consider all of the information set forth in this Form 20-F and the following risk factors. The risks below are not the only ones we face. Additional risks not currently known by us or that we deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks.

Risks Relating to Our Business and the Industrial Gas Industry

To service our debt, we will require a significant amount of cash, which we may not be able to raise or generate. Our ability to generate cash depends on economic factors beyond our control.

        Our ability to generate cash from operations depends largely on the health of the economy in Europe and the United States, as well as on the competitive environment for industrial gases in these markets. In addition, our cash flows from operations outside of western Europe and the United States are subject to devaluation and repatriation risk. If our operating cash flows are not sufficient to meet our operating expenses and debt payment obligations, we may be forced to do one or more of the following:

•

delay or reduce capital expenditures or the introduction of new products and applications;



•

sell additional assets beyond those we currently plan to divest; and



•

forego business opportunities, including acquisitions and key research and development activities.

        If we are unable to meet our debt service obligations, we may attempt to restructure or refinance our existing debt or to seek additional funding. However, we may not be able to do so on satisfactory terms, if at all. Any such failure could result in an event of default under Messer Griesheim's senior facilities and our senior notes.

Our high levels of indebtedness could adversely affect our ability to run our business.

        As of December 31, 2001, we had €1,581.2 million of indebtedness and €300.5 million of additional availability under undrawn committed credit facilities within our senior facilities. Our high level of debt could have important consequences, including the following:

•

we may have difficulty borrowing money in the future for working capital, capital expenditures, research and development or other purposes;

•

Messer Griesheim will need to use a large portion of its cash flow from operations to pay principal and interest on its senior facilities and on the intercompany loan from us, which will reduce the amount of cash available to Messer Griesheim to finance its operations and other business activities;

•

we may be more vulnerable to economic downturns and adverse business developments; and

•

we may have a much higher level of debt than certain of our competitors, which may put us at a competitive disadvantage and may make it difficult for us to pursue our business strategy.

        Messer Griesheim's senior facilities and the terms of the indenture governing our senior notes restrict our ability to incur additional debt, but they do not fully prohibit us from doing so. Accordingly, we may be able to incur substantial additional debt in the future. If we do incur additional debt, the risks outlined above could intensify.

We are subject to restrictive debt covenants.

        Messer Griesheim's senior facilities and the indenture governing the senior notes restrict our ability to do, among other things, any of the following:

•

incur additional debt;

•

pay dividends or distributions on, or redeem or repurchase, the shares we hold in Messer Griesheim;

•

make investments or capital expenditures;

•

create liens;

•

enter into transactions with affiliates; or

•

sell assets or consolidate or merge with or into other companies.

        All of these limitations will be subject to exceptions and qualifications that may be important.

        If Messer Griesheim is not able to comply with any of the covenants set out in the senior facilities agreement, an event of default would occur, and Messer Holding could lose its rights under the intercompany loan. In that event, Messer Holding would have no funds available to make payments to the holders of the senior notes. For a description of the Refinancing Program see Item 4. "Information on the Company—4.A History and Development of Messer Griesheim and Messer Holding".

        In addition, a central part of our strategy is to realize the potential of capital investments we have made in the United States and Europe over the past five years. Achieving significant returns from those investments may require spending additional capital. However, the restrictive nature of the covenants contained in the senior notes and in Messer Griesheim's senior facilities agreement may limit our ability to invest any additional capital, even where required to realize the benefits of prior investments.

Our divestiture program adopted in May 2001 may not proceed as quickly as we plan or achieve the economic benefits we anticipate. Our divestiture program may not produce the significant amounts of cash necessary to repay our senior facilities.

         A major component of our business strategy is the divestiture of substantially all of the assets and operations located outside of our core markets along with certain non-strategic assets and operations within our core markets. We intend to complete all planned divestitures other than the joint ventures in China by year-end 2002. Pursuant to the divestiture program, as of December 31, 2001, the consummated dispositions resulted in debt relief (including deconsolidated debt as a result of the divestiture program) of approximately €234 million. Agreements for additional dispositions provided an additional €73 million of debt relief, resulting, upon consummation, in aggregate consolidated debt relief as of December 31, 2000 of €307 million. While we have divested a significant portion of the assets and operations located outside our core markets, we cannot predict with any certainty how quickly the remaining divestitures can be negotiated and completed or the amount of proceeds we will realize from the remaining divestitures. We estimate that assets and operations to be divested accounted for approximately 24% of the net property, plant and equipment 17% of the net sales and 7% of the normalized EBITDA of our predecessor, Messer Griesheim, as of and for the year ended December 31, 2000. The remaining divestiture of certain of our assets and operations may require additional expenditures prior to their disposal. In most cases, we are attempting to sell these assets through auction processes, although we cannot guarantee that there will be sufficient competition in each case. For assets in some countries, there are only one or two potential acquirors with whom we can realistically negotiate. There is no assurance that we can realize prices for these assets that correspond to their value in other markets or to the cost we incurred in purchasing and installing these assets. For all of these reasons, it is difficult to predict with certainty how quickly all of these divestitures can be negotiated and completed or the amount of proceeds that we will realize from the divestitures. In addition, economic and market conditions that generally affect the pace and amount of corporate acquisition activity may also negatively affect the amount of proceeds we receive from, and the timing of, our divestiture program.

        If we are unable to repatriate sale proceeds to Germany, Messer Griesheim may not be able to use these proceeds for debt repayment and an event of default may occur under Messer Griesheim's senior facilities as a result. If there is an event of default under the terms of the senior facilities, Messer Holding could lose its rights to the intercompany loan and thus its source of funds to make payments on the senior notes.

To implement our cost-savings plan, we will incur significant expenditures of capital. There is no assurance that we will achieve our desired level of savings pursuant to this plan.

        A major component of our business strategy is the realization of cost savings in our core operations, particularly in Europe. In order to implement our cost savings plan, we expect to incur total one-time costs of approximately €84 million between April 30, 2001 and year end 2003. During the implementation phase of our cost savings plan, we expect our implementation costs to exceed realized savings. Moreover, our restructuring costs may be higher than we anticipate, particularly if implementation is delayed, and our information technology improvements may not yield the cost savings benefits that we anticipate. Accordingly, we cannot assure that our cost savings will be at the levels we expect or that the actual savings will be greater than the costs we incurred in implementing our plan. In addition we also cannot assure that we will have the necessary cash to implement our cost-saving measures on a timely basis.

We operate in a highly competitive environment, which has tended to reduce industrial gas prices over most of the past five years. Falling prices could reduce our revenues or cash flows.

        The worldwide industrial gas industry is dominated by seven major producers, four of which have large operations in Europe. Additionally, there are also thousands of smaller, local producers, some of whom operate on a low-cost basis, primarily in the cylinder segment. Some of our competitors may have greater financial resources than we do. The past five years have witnessed consolidation among the biggest producers and an aggressive effort by most large producers to increase market share. The resulting price reductions combined with increasing energy prices have required us and other major producers to reduce costs to maintain profit levels. Although prices appear to have stabilized in many of our markets recently, we cannot assure that the prices of our products will not continue to fall, which could adversely effect our revenues and cash flows, or that we will be able to maintain current levels of profitability.

We are exposed to local business risks in many different countries.

        We manufacture and distribute our products in many countries around the world, with particular focus on 28 countries in Europe and in North America. Some of these countries, particularly those in eastern Europe have suffered from instability in their political and legal systems over the past ten years. Accordingly, our business is subject to risks related to the differing political, social and economic conditions of these various countries. These risks include, among other things:

•

political and economic conditions that could result in our operations being disrupted;

•

differences and unexpected changes in regulatory environments;

•

varying tax regimes, including the risk that individual countries in which we operate will impose withholding taxes on our intercompany transfers;

•

restrictions on the repatriation of capital;

•

exposure to different legal standards and enforcement mechanisms, including differing insolvency regimes; and

•

difficulties in staffing and managing operations.

        Our overall success depends, in part, upon our ability to deal with those risks. We cannot assure that we will continue to succeed in implementing policies and practices that are both effective and realistic in each location where we do business. It is possible that, in light of these and similar considerations, we may divest or discontinue operations in certain countries, including those that would otherwise be considered to be strategic assets within our core markets.

Increases in energy costs could reduce our profitability.

        Energy costs consist principally of electrical power costs. Electricity represented approximately 27% of our cost of sales in 2001. Our air separation and other production processes require significant amounts of electric energy. Though we pass a portion of these energy costs through to our customers under some of our long-term contracts, increases in energy costs can reduce our profitability significantly. A significant portion of our total energy costs are not passed through to customers. It is difficult to predict general trends in electricity prices for our various production facilities. We cannot assure that energy prices will not continue to rise or remain volatile. Any such increases or volatility could have a direct impact on our operating costs and profitability.

We will have ongoing environmental costs. If environmental laws in Europe become more stringent, we could be exposed to further clean-up costs on some of our properties.

        We are subject to laws and regulations relating to the protection of the environment and natural resources. These include, among other things, the management of hazardous substances and wastes, air emissions and water discharges. Violations of some of these laws can result in substantial penalties, temporary or permanent plant closures and criminal convictions. Moreover, the nature of our existing and historical operations exposes us to the risk of liabilities to third parties. These potential claims include property damage, personal injuries and clean-up obligations.

        We own several properties that may have been contaminated by us or prior users. While to date we have not spent material amounts on environmental matters, future costs associated with cleaning up contamination and otherwise managing our environmental liabilities may be significant and could negatively affect our revenues, cash flows and ability to service our indebtedness. We cannot assure you that we will not be found to be responsible for additional violations of existing environmental laws. If that happens, compliance could prove expensive for us and may negatively affect our results of operations and our ability to service our indebtedness.

        We anticipate that the German and U.S. governments and other governments in countries where we do business will continue to develop increasingly strict environmental laws and regulations and to interpret and enforce more aggressively existing laws and regulations. This trend may have an adverse effect on our business, financial condition or results of operations.

Changes in foreign exchange rates could have adverse effects on our financial results and ability to repay indebtedness. Our hedging efforts may be unsuccessful.

        We maintain our books and records, and measure our results, in euros. In 2001, 24% of our net sales came from North America, and more than 25% came from countries where the functional currency is neither the euro nor the U.S. dollar. Fluctuations in exchange rates could decrease the income, as expressed in euros, that we derive from operations in those countries where the functional currency is not the euro. While we enter into hedging transactions to minimize the effects of changes in exchange rates, with respect to certain transactions we cannot assure that we will continue to do so or that our efforts will be successful.

        Most of our indebtedness is denominated in euros or U.S. dollars, and our ability to use cash received in currency other than the euro or dollar to service that indebtedness could be adversely affected by changes in exchange rates against the euro or the dollar. Moreover, we anticipate that a portion of the proceeds from our divestiture program will be in currencies other than the dollar or euro. Fluctuations in exchange rates could decrease the income, as expressed in euros or dollars, that we derive from these asset sales.

Risks Relating to the Capital Structure

If Messer Griesheim does not make payments to Messer Holding under the intercompany loan, Messer Holding will not be able to make payments to the noteholders.

        Messer Holding is a holding company, and its only assets and sources of revenue will be the shares of Messer Griesheim and its intercompany loan to Messer Griesheim. This intercompany loan is subordinated to Messer Griesheim's obligations under the senior facilities. In addition, the intercompany loan is effectively subordinated to all existing and future debt of Messer Griesheim's subsidiaries. The scheduled payments due on the intercompany loan are adequate to make scheduled payments on the senior notes. However, if Messer Griesheim fails to make payments to Messer Holding under the intercompany loan, Messer Holding does not expect to have any other sources of funds that would allow it to make payments to the senior noteholders.

        In addition, Messer Holding has pledged the shares of Messer Griesheim to Messer Griesheim's senior lenders in order to secure Messer Griesheim's payment obligations under the senior facilities. Messer Holding has agreed not to pursue its rights under the intercompany loan if there is an event of default under those facilities. These events of default include failure to comply with financial maintenance ratios and other covenants. Messer Holding has also irrevocably waived all of its rights to receive payments under the intercompany loan if, after an event of default, Messer Griesheim's senior lenders accelerate Messer Griesheim's obligations under the senior facilities. In any such event, the senior lenders have the right to sell the shares of Messer Griesheim pledged to secure their loans, in which case Messer Griesheim's obligations under the intercompany loan will be released. If Messer Holding's rights under the intercompany loan are released, its only source of funds to repay the senior notes will be the proceeds, if any, remaining after the senior lenders have been repaid in full from the proceeds of the share sale.

Messer Griesheim's ability to service its debt depends in part on dividends from subsidiaries.

        Messer Griesheim conducts a majority of its business through direct and indirect subsidiaries. Its ability to service indebtedness, including the intercompany loan, is partially dependent upon the receipt of funds from Messer Griesheim subsidiaries, by means of payments under intercompany loans, dividends, interest or otherwise. The ability of these subsidiaries to make funds available to Messer Griesheim is subject to applicable corporate and other laws and restrictions contained in agreements to which such subsidiaries may be subject. In addition, the intercompany loan is effectively subordinated to all existing and future debt of Messer Griesheim's subsidiaries. Certain of Messer Griesheim's subsidiaries are direct borrowers under the senior facilities and these and other subsidiaries have provided guarantees to the lenders under the senior facilities.

Messer Holding's shareholders may sell their interests to third parties. Any such sale could trigger change of control provisions, which could result in a default under Messer Griesheim's senior facilities and the senior notes.

        Messer Griesheim Group owns 100% of Messer Holding, 33¹/3% of which is owned directly and 66²/3% of which is owned through a wholly-owned holding company. Messer Griesheim Group is held 32.67% by the Messer family through Messer Industrie, 33.665% by Allianz Capital Partners and 33.665% by certain private equity funds managed by affiliates of The Goldman Sachs Group, Inc. If these investors cease to have a specified minimum interest in Messer Griesheim, that would constitute change of control that would trigger certain requirements under the senior notes and under Messer Griesheim's senior facilities. A change of control would require Messer Holding to offer to repurchase the senior notes, which repurchase is backed by a similar requirement in its intercompany loan to Messer Griesheim, and would also require Messer Griesheim to repay its senior facilities. Messer Holding may not have the funds needed for any such repurchase and, if Messer Griesheim is unable to repay its senior facilities at that time, or if Messer Griesheim is unwilling to do so, a default would result, and Messer Holding could lose its ability to make payments to the noteholders.

ITEM 4.    INFORMATION ON THE COMPANY

4.A HISTORY AND DEVELOPMENT OF MESSER GRIESHEIM AND MESSER HOLDING

General

        Messer Holding, incorporated on November 22, 1996, as a German stock corporation under the laws of Germany with an indefinite duration, was a dormant company until it was activated to become a holding company for the shares of Messer Griesheim. Messer Holding is domiciled in and governed by the laws of Germany.

        Headquartered in Norderfriedrichskoog, Germany, we are a holding company with no material assets other than 100% of the shares of Messer Griesheim and our rights under an intercompany loan to Messer Griesheim. Our registered office is located at D-25870 Norderfriedrichkoog and our telephone number is 049-4864-1401.

        The principal predecessor company and main operating company of Messer Holding was founded by the Messer family in 1898 in Hoechst, Germany, to produce acetylene generators and lamps. Until its merger in 1965 with the Hoechst AG subsidiary Knapsack-Griesheim AG, Messer Griesheim operated as a private, family-owned company. Beginning in the 1970s, Messer Griesheim expanded its operations from Germany into other western European countries and the United States. In 1989, it continued to expand its operations geographically to capitalize on opportunities presented by the political and commercial changes occurring in eastern Europe and the reunification of Germany.

        Like most major industrial gas companies, Messer Griesheim followed a program of rapid global expansion from 1997 through 1999. During this period, we made substantial investments in our core markets of North America and Europe and expanded into Latin America, Asia and Africa.

The Acquisition of the Shares of Messer Griesheim

The Acquisition Transactions

        Prior to April 30, 2001, Messer Griesheim was 33¹/3%-owned by the Messer family, through their subsidiary Messer Industrie GmbH, and 66²/3%-owned by Hoechst AG, a subsidiary of Aventis. Aventis was formed by the merger in December 1999 of Hoechst AG and Rhône-Poulenc S.A., two of Europe's largest chemical companies. On December 31, 2000, a consortium of financial investors agreed to acquire Hoechst's interest in Messer Griesheim under a business combination agreement. This consortium, referred to in this Form 20-F as the sponsors, consists of Allianz Capital Partners and six private equity funds managed by affiliates of The Goldman Sachs Group, Inc., which we refer to as the GS Funds. At December 31, 2000, Messer Griesheim had capital stock of €276.1 million par value.

        In preparation for selling its interest in Messer Griesheim and as part of Hoechst's tax planning, Hoechst activated Messer Holding and transferred its shares in Messer Griesheim to it. Hoechst then loaned its shares in Messer Holding to a wholly owned subsidiary, Diogenes 20. Vermögensverwaltungs GmbH that we refer to as Newco 3. The sponsors formed Messer Griesheim Group GmbH (formerly named Cornelia Verwaltungsgesellschaft mbH), referred to as Messer Griesheim Group, which then acquired all of Messer Holding's outstanding share capital from Newco 3 for a purchase price of €618 million, thereby acquiring an indirect 66²/3% interest in Messer Griesheim. Of that purchase price, €388 million was paid at completion of the acquisition. The balance of €230 million is due from Messer Griesheim Group on November 11, 2011, together with interest which, although not currently payable, will accrue thereon at a rate of 250 basis points above three month EURIBOR. In certain circumstances, the deferred purchase price may be payable earlier.

        As part of the acquisition transactions, Messer Industrie contributed its 33¹/3% shareholding in Messer Griesheim to Messer Holding in exchange for 33¹/3% of the shares of Messer Holding. As a result, Messer Griesheim became a wholly owned subsidiary of Messer Holding. To complete the acquisition transactions, Messer Industrie contributed its shares in Messer Holding to Messer Griesheim Group in exchange for shares representing 32.67% of Messer Griesheim Group, cash of €33.2 million, and rights to receive additional cash consideration of up to €35.8 million upon the occurrence of certain events.

        As a result of the transfer and acquisition transactions described above, Messer Griesheim Group owns 100% of Messer Holding, 33¹/3% of which is owned directly and 66²/3% of which is owned through a wholly-owned holding company. Messer Griesheim is held, indirectly through Messer Griesheim Group, 32.67% by the Messer family through Messer Industrie, 33.665% by Allianz Capital Partners and 33.665% by the GS Funds.

        The acquisition transactions have been accounted for in a manner similar to a "purchase" business combination and, accordingly, the cost of the acquisition has been allocated to the assets acquired and liabilities assumed, including those to be disposed of under our divestiture program described elsewhere in this Form 20-F, based on their estimated fair values as of April 30, 2001, the acquisition date. The resulting excess of such cost over the fair value of the net assets acquired is accounted for as goodwill. In connection with the acquisition transactions, substantially all of Messer Griesheim's existing indebtedness was refinanced. Additionally, following the acquisition transactions, Messer Griesheim adopted in May 2001 a divestiture program pursuant to which it intends to sell substantially all of the assets and operations in its non-core markets, located in Asia, Africa and Latin America, as well as certain non-strategic assets and operations in its core markets by the end of calendar year 2002.

        Consideration should be given to the effects of the acquisition transactions, the refinancing program and the divestiture program when comparing historical financial information for periods prior to April 30, 2001 to periods thereafter. To highlight this lack of comparability, a solid vertical line has been inserted, where applicable, between columns in the tables of selected and summary financial data, in the financial statements and elsewhere in Form 20-F to distinguish information pertaining to the pre-acquisition and post-acquisition periods.

        As part of the acquisition transactions, the sponsors contributed €500 million to Messer Griesheim Group, of which €388 million was used to pay the cash portion of the purchase price to acquire Hoechst's share of Messer Holding's outstanding share capital and to make a cash payment to Messer Industrie. The remainder of this contribution has been used to, among other things, pay fees and expenses in connection with the acquisition transactions and contribute additional equity to Messer Holding.

        Messer Griesheim Group also agreed, subject to certain conditions yet to be met, that Messer Griesheim would acquire from Aventis certain assets in China for €32 million, as described more fully below under "China Transactions".

        Under the business combination agreement, Hoechst has received securities of Messer Griesheim Group convertible into 3% of the share capital of Messer Griesheim Group for a nominal effective conversion price. These are convertible only in the event of an initial public offering, a sale of Messer Griesheim or a sale of shares in Messer Griesheim Group by the sponsors if, in each case, the sponsors realize a minimum rate of return on their investment in Messer Griesheim.

Call and Put Options

        In order to meet German tax planning requirements of Hoechst, under the business combination agreement described above, Messer Griesheim Group granted a "call" option to Diogenes 20. Vermögensverwaltungs GmbH, initially a wholly-owned shell subsidiary of Hoechst ("Newco 3") to acquire 66²/3% of Messer Holding's share capital for a promissory note in the amount of the purchase price Messer Griesheim Group paid Newco 3 for its interest in Messer Holding. Newco 3 exercised this call option between January 1 and January 11, 2002. In addition, Hoechst granted an option to Messer Griesheim Group to acquire all the outstanding share capital of Newco 3 for a nominal amount. Messer Griesheim Group exercised its counter-call option between January 16 and January 23, 2002 and merged Newco 3 into itself and canceled the promissory note. As a result of these transactions, Messer Griesheim Group became the direct holder of 33¹/3% and the indirect holder (through 100% ownership of Newco 3) of 66²/3% of the shares of Messer Holding.

Refinancing Program

        In connection with the acquisition transactions described above, substantially all of Messer Griesheim's existing indebtedness was refinanced through the senior facilities and the senior notes described below. Upon the initial closing of the acquisition. Messer Griesheim entered into a senior facilities agreement with aggregate available funds of €1,650 million (€1,340 million of term loan facilities and €310 million of revolving facilities) and a mezzanine bridge facility agreement in the aggregate amount of €400 million.

        On May 16, 2001, the Company issued €550 million principal amount of 10.375% senior notes maturing on June 1, 2011. The proceeds from these senior notes were used by the Company to make an inter-company loan to Messer Griesheim. Messer Griesheim used the inter-company loan to repay in full the mezzanine bridge facility of €400 million and prepay €115 million in principal of the outstanding term borrowings under the senior facilities agreement. The balance of the inter-company loan was used for general corporate purposes. The €14.4 million issuance cost of the senior notes has been capitalized and is being amortized over the period to maturity under the effective interest rate method. At any time prior to June 1, 2006, the Company may redeem all but not part of the senior notes at a redemption price equal to 100% of the principal amount thereof, plus a redemption premium and unpaid interest, and special interest, if any, to the redemption date. At any time on or after June 1, 2006, the Company may redeem all or part of the senior notes at specific redemption prices, expressed as percentages of the principal amount, accrued and unpaid interest, special interest, if any, and additional amounts, if any, to the applicable redemption date on a sliding scale. In addition, prior to June 1, 2004, the Company may redeem up to 35% of the senior notes with the proceeds of one or more public equity offerings at a redemption price equal to 110.375% of the principal amount of the senior notes redeemed.

        The aggregate long-term, outstanding amounts borrowed as of December 31, 2001 and the maturity profile of the senior facilities is given below:

(1)

U.S. Dollar amounts under the facility have been converted into EURO at the rate of €1 = $0.882, GBP amounts at the rate of €1 = GBP 0.6088.

(2)

The total amount borrowed as December 31, 2001 is reflected net of unamortized debt issuance costs of €82.4 million as of December 31, 2001.

(3)

Variable interest rates as of December 31, 2001.

(4)

€4.5 million drawn as a guarantee.

(5)

The commitments with respect to the term loans of the senior facilities, which comprise all of the loans under the senior facilities other than the revolving loans, are reduced by the amount of repayments (i.e., the available facilities, are reduced by the amounts of repayments).

(6)

Tranche A is a multicurrency facility. The interest rate shown is a weighted rate.

(7)

€5.0 million drawn as a guarantee.

(8)

The interest rate shown is a weighted rate.

(9)

Principal repayments are due earlier upon the sale of certain assets, including subsidiaries identified as part of the disposal program. As of December 31, 2001 $179.6 million of the $198.6 million senior term disposal facility had been repaid. As of April 29, 2002, the senior term disposal facility has been repaid in full.

(10)

We are required to use 75% of our excess cash flow, as defined by the senior facilities agreement, in any given year, to repay the loans under the senior facilities. 

        Messer Holding will rely on payments it receives under the intercompany loan to make payments to the holders of its senior notes. Messer Holding's claims under the intercompany loan are subordinated to the claims of the lenders under the senior facilities. Payments on the intercompany loan also are not permitted in certain cases involving payment and non-payment defaults under the senior facilities. In addition, Messer Holding has pledged all of its shares in Messer Griesheim to the senior lenders as security for the senior facilities. Moreover, Messer Holding has agreed that if the senior lenders foreclose on that share pledge following an event of default and seek to sell Messer Holding's shares of Messer Griesheim, Messer Holding will release its claims against Messer Griesheim for payment of the intercompany loan. If Messer Holding is ever required to release its claims for repayment of the intercompany loan, its only source of repayment for the senior notes will be the net proceeds, if any, from a foreclosure sale of the Messer Griesheim shares after the senior lenders have been repaid in full. In addition, the intercompany loan is effectively subordinate to all existing and future debt of Messer Griesheim's subsidiaries.

Divestiture Program

Overview

        In May 2001, immediately following our change in ownership through the acquisition transactions described elsewhere in this Form 20-F, we adopted a divestiture program under which we intend to divest substantially all of our assets and operations outside of our core regions as well as certain non-strategic operations in our core regions. We estimate that assets and operations to be divested accounted for approximately 24% of the net property, plant and equipment, 17% of the net sales and 7% of the normalized EBITDA of our predecessor, Messer Griesheim, as of and for the year ended December 31, 2000. By divesting these operations, our management believes that we can reduce our consolidated debt and focus on our most profitable geographic markets.

        We intend to complete all planned divestitures, other than the joint ventures in China described in Item 4. "Information on the Company—4.A History and Development of Messer Griesheim and Messer Holding—China Transactions", by year-end 2002.

        During the eight month period ended December 31, 2001, pursuant to the divestiture program, we completed disposals of our home care business in Germany, our health care business in Canada and our non-cryogenic plant production operations in Germany, the United States, Italy and China. We have also completed disposals of our operations in Argentina, Brazil, Mexico, South Africa and South Korea, our nitric oxide business in Germany, and our carbon dioxide business in the United States. We have entered into agreements to sell our operations in Trinidad and Tobago.

        We are required under Messer Griesheim's senior facilities agreement to use the proceeds of these divestitures to repay borrowings under the senior facilities, and the senior facilities agreement requires us to repay at least $198.6 million of borrowings (the entire senior term disposal facility) by April 2003. As of April 29, 2002, the senior term disposal facility has been repaid. Separately, Messer Griesheim is required to ensure that the combination of the repayment of the senior term disposal facility and the assumption of indebtedness by third parties in connection with divestments of assets will result in the reduction of the aggregate indebtedness, as of April 30, 2001, of Messer Griesheim and its consolidated subsidiaries by at least €255 million by April 30, 2003. Upon completion of the entire divestiture program, we expect that our divestitures will permit us to reduce our consolidated debt reflected on the December 31, 2000 balance sheet by at least €400 million.

        Pursuant to the divestiture program, as of December 31, 2001, the consummated dispositions resulted in debt relief (including deconsolidated debt as a result of the divestiture program) of approximately €234 million. Agreements for additional dispositions provide for an additional €73 million of debt relief, resulting, upon consummation, in aggregate consolidated debt relief as of December 31, 2000 of €307 million.

        Separate from the divestiture program, in light of unstable political conditions in certain countries or the prevalence of business practices which are inconsistent with the standards we apply generally in our core markets and operations or for other reasons, we may decide to sell or discontinue operations in those countries, including operations that would otherwise be viewed as strategic assets within our core markets.

China Transactions

        Messer Griesheim operates in the People's Republic of China through eight directly owned joint ventures as well as through interests in eight joint ventures held by Aventis (China) Investment Co. Ltd., or ACIC, and managed by employees of Messer Griesheim. Pursuant to the business combination agreement and a related China sale and purchase agreement, Messer Griesheim has agreed to purchase ACIC's interests in the eight ACIC joint ventures. Although China is not a core market for us, Aventis required this purchase in order to enable Aventis to divest all of its interests in the industrial gases business, not simply its interest in Messer Griesheim. We anticipate the acquisition of the ACIC joint ventures to close over the course of the year 2002. Although we expect to divest to one or more third party buyers both the Messer Griesheim China joint ventures and the ACIC joint ventures, we can provide no assurance as to when these divestitures will be completed.

        Pursuant to the China sale and purchase agreement, the assets currently held by ACIC will be transferred into Messer Griesheim China Holding, a wholly-owned subsidiary of Messer Griesheim GmbH registered in Frankfurt am Main. The completion of the purchase will depend on the consent and outcome of discussions with third parties, including Chinese regulatory authorities and local joint-venture partners, and the satisfaction of certain other conditions. In the event that such conditions cannot be satisfied before April 30, 2003 under the business combination agreement, Messer Griesheim's obligations to purchase ACIC's interests in the ACIC joint ventures will terminate. We anticipate the acquisition of the ACIC joint ventures to close over the course of the year 2002.

        The purchase price for the ACIC joint ventures is €32 million plus interest from April 30, 2001 until the completion of the purchase of the ACIC joint ventures at the rate of 200 basis point over three month EURIBOR. Upon acquiring the ACIC interests, Messer Griesheim has agreed to assume the debt of the ACIC joint ventures upon the date of completion of the transactions described above. As of December 31, 2001, such debt amounted to approximately €17.1 million. The incurrence of any further debt by ACIC relating to the ACIC joint ventures between the date hereof and the closing of the transactions contemplated by the China sale and purchase agreement will be subject to the prior approval of Messer Griesheim. Payment of the purchase price is guaranteed by Messer Holding's parent, Messer Griesheim Group.

Singapore Transactions

        Prior to restructuring its Singapore investments as described below, Messer Griesheim had a joint venture with Texaco Nederland B.V., through a company called Singapore Syngas Pte Ltd, or Syngas. In February 1998, Syngas agreed to build a synthetic gas plant in Singapore for Celanese Singapore Pte. Ltd, which was at that time a subsidiary of Hoechst. Messer Griesheim guaranteed to Celanese that the plant would be completed by July 1, 2000. Messer Griesheim also provided financial guarantees of bank loans incurred by Syngas to finance construction of the plant.

        Syngas encountered significant plant-specific difficulties and delays which gave rise to potential claims under the completion guarantee and could entitle the bank lenders of Syngas to accelerate their loans to Syngas.

        Messer Griesheim also operated in Singapore through its wholly owned subsidiary, Messer Singapore Pte. Limited.

Restructuring the Singapore Investment

        In contemplation of the acquisition transactions, Messer Griesheim was required to limit its exposure to the Syngas project. Accordingly, on April 30, 2001 Messer Griesheim entered into an agreement with Hoechst effectively limiting its entire exposure to the Singapore operations (including both Syngas and Messer Singapore) to €92 million, measured from September 1, 2000.

        Under the agreement, Messer Griesheim transferred on April 30, 2001 its 100% interest in Messer Singapore and 50% interest in Syngas, together with most of its liabilities related to Singapore, to Messer Singapore Holding GmbH, a special purpose company. The company is currently 39% owned by Aventis Regional Treasury Pacific Pte. Ltd., Singapore, 39% by Messer International GmbH, a subsidiary of Messer Griesheim, 11% by a special purpose company owned by Messer Industrie and 11% by a special purpose company owned by Dr. Schmieder, our Chief Executive Officer, and Mr. Doerr, our Head of North American Operations. Messer Griesheim retained its liability under a guarantee in favor of the bank lenders to Syngas, but Messer Singapore Holding has agreed to indemnify Messer Griesheim for liabilities that may arise under that guarantee.

        Funding of Messer Singapore Holding is provided through shareholder loans from Hoechst, for 66²/3% of funding requirements, and Messer Griesheim, for 33¹/3% of funding requirements, except that Messer Griesheim's aggregate funding requirements are capped at €92 million, and Hoechst will be responsible for 100% of Messer Singapore Holding's funding requirements once this cap has been reached. Although the transfer to Messer Singapore Holding occurred on April 30, 2001, this funding arrangement, including Messer Griesheim's funding obligations under this cap, takes account of all of Messer Griesheim's funding to its Singapore operations since September 1, 2000. Accordingly, Messer Griesheim's remaining funding obligations under this cap, net of 33¹/3% of various shareholder loans and other financial support already provided by Messer Griesheim to its Singapore operations since September 1, 2000, were €63.6 million as of April 30, 2001 and €14.5 million as of December 31, 2001.

        In addition, Messer Griesheim received from Hoechst on April 30, 2001 a €26.4 million cash payment, accounting for 66²/3% of the funding requirements of the Singapore operations since September 1, 2000 (excluding payments to Celanese and Texaco, of which Hoechst had already funded €31.1 million through shareholder loans to Messer Griesheim, as described below under "Developments with Celanese and Texaco").

        More recently, in December 2001, Messer Griesheim transferred its 39% interest in Messer Singapore Holding to Messer International GmbH, a wholly owned subsidiary of Messer Griesheim. At the same time, Hoechst transferred its 39% interest in Messer Singapore Holding to Aventis Regional Treasury Asia Pacific Pte. Ltd., a wholly owned subsidiary of Aventis.

Developments with Celanese and Texaco

        In March 2001, Texaco and Messer Griesheim entered into arrangements with Celanese which settled the claims of Celanese under Messer Griesheim's completion guarantee and amended the existing gas supply agreement between Syngas and Celanese. As a result, Celanese irrevocably released and discharged Messer Griesheim and its shareholders from all claims in any way related to the completion guarantee and acknowledged that such guarantee had expired. These amendments and modifications involved, among other things, cash payments by Messer Griesheim to Celanese which are included in the overall allocation of Syngas funding exposures of 33¹/3% to Messer Griesheim and 66²/3% to Hoechst and reflected in the cap on our remaining funding obligations referred to above.

        The settlement amount allocated to and paid by Messer Griesheim was €28.6 million, of which €19.8 million was lent by Hoechst. The repayment claim against Messer Griesheim for this loan was waived by Hoechst on April 30, 2001.

        In February 2002, Aventis, Messer Griesheim and Messer Singapore Holding reached an agreement with Celanese and Celanese Singapore (Pte.) Ltd. in which Messer Singapore Holding agreed to pay $12.5 million to Celanese Singapore for the release of a prior agreement requiring Messer Griesheim to pay Celanese certain consideration. One third of the $12.5 million will apply towards the €92 million funding cap of Messer Griesheim to the Singapore operations.

        In conjunction with the Celanese settlement, a put-option agreement dated December 20, 1999 between Messer Griesheim and Texaco was modified by an agreement dated March 29, 2001. The original put-option agreement gave Texaco an option to sell 25% of the shares in Syngas to Messer Griesheim. Under the modified put-option agreement, Messer Griesheim purchased from Texaco the outstanding shareholder loans made by Texaco to Syngas in excess of Texaco's 25% proportionate equity interest in Syngas and related funding obligations. Messer Griesheim paid a purchase price of €17.2 million for the loans. Of that amount, Hoechst lent €11.3 million to Messer Griesheim. The repayment claim for this loan was waived by Hoechst on April 30, 2001. In exchange, Texaco agreed that Aventis can require Texaco to exercise the put option with respect of 25% of the shares in Syngas at any time on or after May 1, 2001 and no later than June 30, 2001 for a consideration of $1. The put was exercised on June 20, 2001, at which time the Syngas shares acquired from Texaco were transferred directly to Messer Singapore Holding GmbH, and not to Messer Griesheim.

        As a result of the change in ownership that occured when the Texaco put option was exercised, Syngas was required to repay its outstanding bank credit facilities which were due June 30, 2001. Shareholder loans were extended to Syngas for this purpose. Of these shareholder loans, 75% were funded by Messer Singapore Holding GmbH and 25% were funded by Texaco.

        In connection with the implementation of the arrangement between Hoechst and Messer Griesheim relating to Syngas, and the subsequent developments regarding Celanese, Texaco and the bank credit facilities Hoechst and Messer Griesheim are actively pursuing a divestiture process with respect to Messer Singapore Holding GmbH or its interests in Syngas and Messer Singapore.

        For a description of our principal capital expenditures see Item 5. "Operating and Financial Review and Prospectus—5.B Liquidity and Capital Resources".

Recent Events

        During February 2002, Messer Griesheim entered into an agreement with a private investor to divest its activities in Venezuela in connection with Messer Griesheim's divestiture program. During March 2002, Messer Griesheim sold its Messer UK Nitrogen services business. The sale is composed of the sale of the assets owned by Messer UK as well as the sale of existing customer contracts and contacts. During April 2002, Messer Griesheim completed the sale of its activities in Eygpt to Air Liquide in connection with our divestiture program. The impact of each of these transactions on the consolidated statements of operations is not significant. The proceeds, however, from the sale of our operations in Egypt have enabled Messer Griesheim to repay in full the senior term disposal facility.

4.B BUSINESS OVERVIEW

General

        We are a producer and distributor of industrial gases, including oxygen, nitrogen, argon, carbon dioxide, hydrogen, helium, specialty gases and acetylene. The industrial gases we produce are used in a broad range of industries, such as the steel, chemicals, food and beverages, pulp and paper, automotive, lighting, electronics and glass industries. We deliver our products in one of three ways:

•

direct delivery in gaseous form, either from on-site production facilities or through pipelines,



•

bulk delivery, principally in liquid form, in large volume tanks, or



•

returnable cylinders, principally in gaseous form.

        We operate in 49 countries through more than 425 facilities, including production plants, distribution and filling stations and research centers as at December 31, 2001. In 2001, we had an estimated global market share of approximately 5%, making us the seventh largest industrial gas producer worldwide, and leading market shares in Germany and certain other countries in central and eastern Europe. We also have strong businesses in selected industrial areas of the United States and in selected niche markets in other western European countries. In the eight months ended December 31, 2001, we generated net sales of €1,047 million and normalized EBITDA of €245 million and in the four months ended April 30, 2001 our predecessor generated net sales of €574 million and normalized EBITDA of €126 million.

        Our primary or core markets are Europe and North America. Our two largest markets, Germay and North America, collectively accounted for 65.5% of our net sales and 62.1% of our normalized EBITDA for the eight months ended December 31, 2001. In accordance with the divestiture program adopted in May 2001, we intend to divest substantially all of our assets and operations outside our core markets as well as certain non-strategic assets and operations in our core markets by year-end 2002.

        We believe that the industrial gas industry benefits from favorable characteristics including stable earnings from long-term supply contracts, limited cyclicality due to a highly diversified range of customers, high barriers to entry due to significant required start-up investments and favorable growth prospects driven largely by new applications. We believe that the worldwide industrial gas industry is relatively concentrated, with competition taking place at the regional or local level. In most geographic markets, the two or three largest producers have a significant combined market share. The seven largest producers are estimated to have accounted for approximately 75% of the worldwide market in 2001. Except for the impact of Linde's acquisition of AGA in 2000, the relative market shares of the leading industrial gas producers have remained broadly unchanged over the past decade, which we believe illustrates the industry's stability. We also believe that there is a recent trend among industry participants towards a focus on return on capital as opposed to growing market share.

Strengths

        We believe our principal strengths are:

A leading market position in Germany and strong positions in certain other core markets

        We are one of the leaders in the industrial gas market in Germany where we have an estimated market share of approximately 31% second to Linde/AGA which has an estimated market share of approximately 38%. We offer our customers a complete product portfolio, highly efficient infrastructure, highly qualified staff and a full range of technologies. We own a 550 kilometer oxygen and nitrogen pipeline network in the Rhine and Ruhr area, the industrial heartland of Germany, which is the only oxygen and nitrogen pipeline network in the region and the largest industrial gas pipeline in Germany. We also own a 40 kilometer oxygen and nitrogen pipeline network in the Saar region. Through both of these highly automated pipeline networks, we provide products to many well established long-term industrial customers, while benefiting from a significant barrier to entry by competitors who do not have such a pipeline infrastructure.

        We have solid businesses in selected industrial areas of the United States. In Delaware, Maryland, New Jersey, New York, Pennsylvania and Virginia, we operate a strong cylinder business. We also operate a strong bulk business in California, Texas and the industrial areas of the Mississippi River valley.

        In Western Europe, we have followed a niche strategy, based on perceived opportunities in selected countries. We have developed strong businesses in carbon dioxide production and distribution in the United Kingdom, France, Switzerland and Italy and in cylinder delivery of specialty and industrial gases in Belgium and France. We also operate a 90 kilometer oxygen and nitrogen pipeline network in the industrial area of Tarragona, in northeastern Spain.

        We were one of the first western industrial gas companies to enter central and eastern Europe in the late 1980s. We have a leading position in the region, with estimated market shares ranging from approximately 45% to 85% in Hungary, Slovakia, Slovenia, Croatia, Bulgaria, Bosnia and Yugoslavia. We also have a strong position in Austria with an estimated market share of approximately 18%. We believe our strong presence in central and eastern Europe positions us well to capitalize on the attractive growth prospects we believe this region offers.

Stable cash flows from long-term contracts

        A significant portion of our sales is derived from long-term contracts. Contracts in our on-site production and pipeline supply businesses in Europe and the United States typically have terms of 10 to 15 years and usually contain "take-or-pay" minimum purchase requirements. In each of the last three years, the take-or-pay minimum purchase requirements in our on-site and pipeline supply contracts accounted for approximately 60% to 70% of the total amount of net sales that we generated under these contracts in Germany and 40% to 45% in the United States.

        Contracts in our bulk businesses generally have terms of two to three years in Europe and five to seven years in the United States. Contracts in both our on-site and pipeline and bulk businesses have historically exhibited high renewal rates, with over 90% of customers whose contracts expired in the past five years renewing their contracts with us. On-site and pipeline contracts in Germany and the United States accounted for approximately 12% of our total net sales in 2001. Bulk contracts in these two countries accounted for approximately 22% of our total net sales in 2001. We estimate that our on-site, pipeline and bulk businesses in Germany and the United States together accounted for approximately 34% of our total net sales and 45% of our normalized EBITDA in 2001.

Diversified customer base

        We believe that our diverse customer base helps protect our operating results against macroeconomic fluctuations. We have a diverse customer base in the steel, primary metal, chemicals, waste processing, automotive, oil refining, food and beverages, healthcare, electronics and glass industries. Our customer portfolio includes a wide range of large international companies such as ThyssenKrupp, Bayer, Veba, Celanese, Clariant, BASF, Volkswagen, Bosch, DaimlerChrysler, Textron-Kautex, NUCOR, DuPont, General Electric, Caterpillar, Nestlé and Shell. We are not dependent on any customer or set of customers. For example, in 2001, our top ten customers accounted for only 10.5% of our total net sales. No single customer has accounted for more than 4% of our total net sales in any of the past three years.

Strong applications technology capability

        In addition to producing and distributing industrial gases, we also have an applications technology business. Our applications technology division develops and markets a wide range of industrial gas applications and technologies as a service to our customers and a means of expanding the uses of and demand for our products. We believe that we have particularly strong applications technology capabilities in the steel, metals, refining, chemicals and food industries. A significant portion of our bulk business in particular results from applications developed internally in cooperation with our customers or invented by us for use by our customers.

Experienced senior management backed by strong shareholder expertise

        We are led by an experienced senior management team. Our eight most senior managers, Dr. Klaus-Jürgen Schmieder, Messrs. Stefan Messer, Peter Stocks, Harald Pinger, Winfrid Schmidt, James Doerr, Jens Dornedden and Michael Hoche, represent a combination of professionals with long-term experience within our company and recent hires with significant experience at our competitors and in other industries. Messrs. Schmidt, Messer and Doerr have each served with Messer Griesheim for 31 years, 23 years and 14 years, respectively. Dr. Schmieder and Mr. Stocks have significant restructuring experience from former positions at Hoechst and Air Products, respectively. Mr. Pinger has management and controlling experience from former positions at Unilever, Fresenius Medical Care and Fresenius Kabi. Mr. Dornedden has controlling and investor relation experience from his former position at Hoechst. Mr. Hoche has significant accounting and controlling experience from former positions at Reckitt Benckiser and Price Waterhouse.

        Messer Industrie is the holding company for the Messer family's interests in Messer Griesheim, with over one hundred years' experience in the industrial gas business. In addition to the Messer family, our shareholders include Allianz Capital Partners, a subsidiary of Allianz Group, a leading global financial services company and one of the largest insurance companies worldwide, and certain private equity funds managed by affiliates of The Goldman Sachs Group, Inc.

Strategy

        We intend to maximize value by focusing on existing operations in our core markets of Germany, the rest of Europe and North America. This contrasts with our former emphasis on volume growth and global expansion. We believe that this strategy will increase our return on assets and cash flow and reduce our leverage going forward. The key elements of this strategy are as follows:

Reduce our debt

        We are implementing a comprehensive divestiture program adopted in May 2001 through which we intend to divest substantially all of our assets and operations in Asia, Latin America and Africa, as well as certain non-strategic assets and operations in our core markets. We estimate that assets and operations to be divested accounted for approximately 24% of the net property, plant and equipment and 17% of the net sales and 7% of the normalized EBITDA of our predecessor, Messer Griesheim, as of and for the year ended December 31, 2000. We intend to divest these assets, other than the joint ventures in China, prior to year-end 2002. Upon completion of the entire divestiture program, we expect that the divestitures will permit us to reduce our consolidated debt reflected on the December 31, 2000 balance sheet by at least €400 million. Under the senior facilities agreement, we are required to repay at least $198.6 million of our senior term disposal facility by April 2003. As of April 29, 2002, the senior term disposal facility has been repaid.

        In addition to our divestiture program, we also intend to reduce our need for additional debt financing and achieve further deleveraging by reducing our capital expenditures going forward and by implementing a cost-savings plan, both of which are discussed below.

Exploit recent investments and reduce capital expenditures

        We believe that we can exploit recent investments and reduce capital expenditures principally by focusing on our existing higher-yielding assets in the United States and Europe. Over the last five years, we have invested more than €2 billion in new assets, of which 36% was invested in Germany and 16% in the United States to add production capacity and increase production efficiencies. As a result, we currently have additional production capacity in these markets, which we believe we can exploit with limited additional investment. Reflecting our former rapid global expansion strategy, our capital expenditures in each of the last five years averaged more than 25% of our total net sales. In 2001, we reduced our capital expenditures to no more than 10% of our total net sales and intend to maintain this reduced level of capital expenditures for the foreseeable future. Our capital expenditures in the future will be focused on making modest additions to our existing operations in our core markets that will allow us to exploit the full potential of earlier investments.

Profitably grow with the market in our core regions

        We believe that we will profitably grow with the markets in our core regions principally by maximizing utilization of our existing production capacity, much of which has been recently constructed and is only now beginning to commence operations (including, for example, two new large air separation units and a carbon monoxide plant in Germany). We also intend to continue drawing on our strong applications technology capability to service customers and develop new value-added products and applications, focusing in particular on faster growing industry segments such as petrochemicals, refining, electronics and food.

Implement our cost-savings plan

        We are implementing a program to reduce our operating costs. This cost-savings plan focuses on Europe, particularly Germany. Our cost-savings program was developed with the support of Roland Berger, a management consulting firm, which we have also retained to assist us in the implementation of the program. We have identified most of the specific cost-savings measures that we expect to achieve by year-end 2003. We expect these will reduce the cost base of our operations in our core markets relative to its level for the year 2000 by €100 million by year-end 2003. To implement these cost-saving measures, we expect to incur one-time costs of €84 million between April 30, 2001 and year end 2003. For the eight month period ending December 31, 2001 we have reduced the cost base of our operations in our core markets relative to its level for the year 2000 by €27.0 million. As a result of implementation of these measures we incurred total one-time costs of approximately €25.3 million (excluding €12.5 million of costs that were included as part of the purchase price accounting adjustments) for the eight month period ended December 31, 2001. We expect to incur an additional €46.6 million of one-time costs within the next two years. The principal components of this program are as follows:

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Reduce staff.  Our plan to centralize key business processes as discussed below will enable us to eliminate duplicative positions in many departments including engineering, production, strategic marketing, logistics and applications technology development across our European operations. On February 8, 2001, we publicly announced plans to eliminate approximately 850 out of more than 5,600 positions in Europe, principally in Germany.



•

Reduce energy costs.  Energy is our single largest operating cost with electricity representing approximately 27% of our total operating costs in 2001. In our German operations, we believe we have a history of aggressively managing energy costs. We intend, through our initiative to centralize key business processes discussed below, to extend this aggressive energy management to all of our operations. Among other things, we are seeking to lower our overall energy costs by negotiating more favorable contracts with power suppliers and by implementing more efficient and proactive operational measures at our plants.



•

Centralize key business processes in Europe.  We intend to simplify our management structure in Europe, where it is currently organized along autonomous, regional lines. Our goal is to centralize functions relating to supply chain management and applications technology development to the extent necessary to achieve cost savings and synergies in Europe, while keeping other functions, such as marketing and sales, decentralized in order to remain close to our customers in the local markets we service. We intend to make substantial information technology investments to support this centralization of key business processes. We have begun implementing this program by recently reducing distinctions between business units in Germany and some other European countries where we have consolidated some of our sales and marketing activities on a regional basis. To this end, we have installed a European marketing and applications group as well as a purchasing and logistics group.

The Industrial Gas Industry

General

        The industrial gas industry consists of the production, distribution and sale of industrial gases and related hardware. Industrial gases are sold to three main customer sectors: industrial customers (such as the steel, chemicals, oil refining, cutting and welding, food, pulp and paper, automotive, lighting and glass manufacturing industries), medical customers (such as hospitals and clinics) and specialty customers (such as electronics manufacturers, research facilities and universities and fiber optics manufacturers). Total sales of industrial gases worldwide in 2001 were estimated at $34 billion, of which $29 billion was attributed to the industrial sector, $3 billion to the medical sector and $2 billion to other specialized sectors.

        Most industrial gases are produced by separating and purifying gases found naturally in the atmosphere through physical and chemical processes or by mixing various kinds of industrial gases. Most industrial gases are commodity gases that can be produced at similar purity levels by a broad range of manufacturers. Specialty gases are produced by a smaller number of manufacturers. The global industry's most important products by sales are oxygen, nitrogen, argon, carbon dioxide, acetylene, specialty gases and hydrogen. In 2001, the most recent year for which we have independent figures, oxygen, nitrogen, argon, carbon dioxide, acetylene, specialty gases and hydrogen accounted for approximately 29%, 21%, 12%, 9%, 8%, 5% and 5%, respectively, of estimated global sales. We believe that the industrial gases that we produce, and the percentages of our total net sales they represent, generally follow the industry-wide pattern.

        Industrial gases are delivered in one of three ways: (a) direct delivery in gaseous form, either from on-site production facilities or through pipelines, (b) bulk delivery, principally in liquid form in large volume tanks or (c) returnable cylinders, principally in gaseous form. We use each method of distribution.

Market Structure and Competition

        Globally, there are currently seven major industrial gas producers and distributors: L'Air Liquide, S.A., The BOC Group PLC, Praxair, Inc., Air Products & Chemicals, Inc., Linde AG, Nippon Sanso Corp. and Messer Griesheim. Collectively, these seven producers accounted for approximately 75% of total worldwide sales of industrial gases in 2001. We are the seventh largest industrial gas producer in the world, with an estimated global market share of approximately 5% but with higher market shares in Germany and in certain other markets as described below. There are also thousands of smaller, local companies that are primarily active in the cylinder segment. Despite the dominance of large companies, competition in our industry is largely local rather than global due to relatively high distribution costs over long distances and the limited scope for cost-sharing across markets. Competition in the local markets is based on price, reliability of supply, product quality, technology and service to customers.

        The nature of competition varies by distribution mode (on-site and pipeline, bulk or cylinders) and by geographic area. On-site and pipeline distribution operations generally face the lowest competitive risk because of the relatively high barriers to entry, which include the need for high initial capital investments in facilities or pipelines and the high cost to the customer of switching suppliers. Bulk distribution operations also generally face low competitive risk because of similar high barriers to entry. The cylinder supply market for commodity gases, such as nitrogen, oxygen, carbon dioxide and acetylene, is the most competitive. Because of lower entry costs, smaller, local companies are able to penetrate this market. The specialty gas markets in which we operate are highly capital-intensive, requiring specialized handling and technological expertise, and are therefore largely restricted to the seven major international industrial gas producers.

        Competition in Germany and the rest of Western Europe tends to be among entrenched producers, with a few large companies dominating the industrial gas market in each country. The structure of competition in the United States generally mirrors that of Western Europe, except in the cylinder market, which is divided relatively evenly among independent distributors and larger industrial gas producers. The industrial gas market in Eastern Europe is generally less mature than in Western Europe and the United States, and the competitive environment is more dynamic as a result. We believe that this region offers attractive growth prospects.

Significant Industry Trends

        The global market for industrial gases is estimated to have grown from $28 billion in 1995 to $34 billion in 2001. The industrial gas industry is to some extent protected from cyclical swings in demand because it supplies a broad range of industries. New applications for industrial gases within faster-growing industry segments (for instance, petrochemicals, refining, electronics, environmental and food) also help compensate for slower demand growth and cyclicality from other more mature segments.

        Although industrial gas prices appear to have recently stabilized in many of the markets in which we operate, prices have consistently decreased for at least the last 10 years, especially in the commodity gas cylinder segments, due to aggressive efforts by most large producers to increase market share. The profit margin impact of this price erosion has been partially offset by efficiency improvements throughout the supply chain and regional consolidation among large participants in the industry, permitting economies of scale. In addition, new applications for industrial gases have increased sales volumes and profit margins.

Our Products

        Oxygen.    Iron and steel producers need oxygen to accelerate melting and to improve metal quality during the refining process. A modern steel plant can use in excess of 2,000 tons of oxygen per day. Oxygen is also used by the chemical industry for a variety of oxidation processes. Mixed with fuel gases, oxygen provides a heat source for many welding, cutting and metal fabrication processes. Oxygen fed furnaces and burners are also used in non-ferrous metal plants, brick-making kilns, pulp and paper mills, sewage plants and glass manufacturing plants. Oxygen enhanced combustion can often improve fuel efficiency and help reduce harmful byproducts. Oxygen also has a variety of medical applications in the healthcare industry.

        Nitrogen.    Nitrogen possesses several characteristics that make it one of the world's most widely used and versatile industrial gases. Nitrogen is capable of being chilled to intensely cold levels. This makes liquid and gaseous nitrogen a highly effective, versatile and non-polluting agent for freezing and chilling. Under normal conditions, nitrogen is chemically inactive and extremely dry, and an atmosphere of nitrogen prevents most oxidation, combustion and other reactions from taking place. This makes nitrogen an important purging and blanketing, or "buffering", gas in the steel, aluminum, chemical, refining and electronics industry.

        Argon.    Although argon constitutes less than 1% of the atmosphere, it is the most abundant truly inert gas and is increasingly important to many industries. Like nitrogen, argon is used in the steel industry as a buffer. Argon is blown into furnaces to stir the molten metal and to flush other gases from the melt, principally in the production of stainless steel. It is also used to provide a buffering atmosphere to prevent oxidation and combustion in welding, metal fabrication, aluminum processing, microelectronics, glass coating, advanced ceramics and other industrial processes.

        Carbon dioxide.    Carbon dioxide is generally intercepted from the byproduct streams of other companies' manufacturing processes or from natural sources and "cleaned", or separated from impurities, in our plants. Solid carbon dioxide at minus 79° celsius (often referred to as "dry ice") is, like liquid nitrogen, used for chilling and freezing in the food industry. Carbon dioxide dissolves easily in water, making the resultant solution slightly acidic, and is often used to balance the pH of water as a preferred alternative to the addition of acids. Its solubility makes it a chosen method for carbonating drinks of all kinds.

        Specialty Gases.    Specialty gases include common industrial gases which are produced in high-purity form (including high-purity oxygen, nitrogen and hydrogen), rare gases (including helium, xenon or krypton) and special mixtures of gases. We supply over 300 different special gas mixtures to meet the specific needs of industries, particularly the electronics industries, and for calibration uses in laboratories and research establishments. Ultra-pure specialty gases are also used for a variety of process steps in the manufacture of semi-conductors.

        Acetylene.    Acetylene is a fuel gas which is primarily used in the metal industry to weld, cut, braze and solder metals in various environments, including underwater and in extreme cold.

        Hydrogen.    Hydrogen is primarily used in the oil industry for upgrading crude oil. The chemical industry uses hydrogen as an active ingredient in many chemical processes. The automotive industry is currently conducting research into the use of hydrogen, which fuels spacecrafts, as an alternative fuel for automobiles. Hydrogen is also used to hydrogenate vegetable oils in the production of margarine and other food products. High-purity hydrogen is used in the electronics industry for the manufacture of semiconductors.

Production Methods

        Industrial gases are principally produced by one of four methods:

        Cryogenic Air Separation.    Cryogenic (low temperature) air separation is a mature technology, although incremental technical advances are still yielding improvements in capital cost, operating cost, ease of operation and reliability. The cryogenic process involves cooling air to a liquid form and then slowly vaporizing it by increasing its temperature. Because each of the individual gases within air vaporize at a different temperature, separation of gases can be accomplished by precisely controlling the temperature. The plants, called air separation units, or Air Seperation Units, are complexes of compressors, distillation columns and various other components. The production process in modern air separation plants is highly automated, so few on-site employees are needed for the normal operation and maintenance of the plant.

        Cryogenic systems are used for the large or medium-scale production of oxygen, nitrogen and argon, either in liquefied form for storage and transportation or as a gas for piping directly to large volume users. For those industries (such as the steel, petrochemicals and oil refining industries) that consume large quantities of these gases, the usual source of supply is from an Air Seperation Unit.

        The investment required to build an Air Seperation Unit varies significantly depending on a variety of factors, including the size and complexity of the plant, total capacity, local construction costs and customer specifications. A typical large Air Seperation Unit generally costs over €30 million to construct.

        Non-Cryogenic Air Separation.    Non-cryogenic techniques involve the filtering of air without chilling and reheating it. The two principal methods, pressure swing adsorption and membrane diffusion, were first developed during the 1970s and are becoming increasingly significant for smaller or less demanding on-site applications. Gas from non-cryogenic separation techniques is of a lower purity than gas from the cryogenic process, and it is possible to produce only one kind of gas at a time in this manner (as the remaining gas is released into the atmosphere after the filtering process is completed). Oxygen, nitrogen and argon can all be produced through non-cryogenic air separation.

        Recovery.    Carbon dioxide and hydrogen are produced by purchasing gases that are the by-product of other industrial processes and purifying them to the level of purity required by the customer. Carbon dioxide can also be produced by purifying sources obtained from wells or other natural sources.

        Synthesis.    Acetylene and most specialty gas mixtures are produced by synthesizing, or mixing together, different gases or elements. Acetylene, for example, is produced from a process involving calcium carbide and water.

Raw Materials and Energy

        Energy costs consist principally of electrical power costs. Electricity represented approximately 27% of our cost of sales in 2001. Energy is the largest single cost item in the production of industrial gases primarily because Air Seperation Units are energy intensive. A large unit that produces 2,000 tons of oxygen per day consumes 20 megawatts of electricity per hour to run its compressors. Many of our on-site and pipeline supply contracts pass the majority of energy costs specific to such contracts through to customers.

        The raw material for producing oxygen, nitrogen and argon is air, which is free. For carbon dioxide, hydrogen and most specialty gases, raw materials such as the byproduct streams from other industrial processes, are largely purchased from outside sources and typically through long-term contracts with many different suppliers. Helium is extracted from natural gas deposits. Only a few sources of natural gas in the world contain a sufficient proportion of helium to allow for its economical separation. These are principally in the United States, Poland, Russia and Algeria. In the United States, we have a long-term supply contract with Exxon, one of the largest helium producers in the world. We also buy helium from suppliers in the other three countries.

Distribution

        Like other large industrial gas producers in the industry, we deliver our industrial gas products in three ways: (i) direct delivery in gaseous form through on-site production or pipeline supply, (ii) bulk delivery, principally in liquid form in large-volume tanks and (iii) delivery, principally in gaseous form, in smaller volume cylinders. Our method of delivery is generally determined by the lowest cost means of meeting our customer's needs, depending upon factors such as volume requirements, purity, pattern of usage and the form in which the product is used (in gaseous or liquid form).

        On-site and Pipeline Supply.    We typically supply customers who require the largest volumes of industrial gases (typically oxygen, nitrogen, carbon monoxide and hydrogen) and who have a relatively constant demand from Air Seperation Units or non-cryogenic plants built adjacent to or on these customers' facilities. We own and maintain these plants. Because these plants are usually dedicated solely to supply a particular customer, our product supply contracts generally contain take-or-pay minimum purchase requirements.

        For customers who use large volumes of industrial gases such as oxygen and nitrogen but who do not have a plant on or adjacent to their facilities, we deliver gases, where feasible, through a pipeline from nearby plants. If several potentially important customers are concentrated in a particular region (such as the Rhine and Ruhr area in Germany), they can all be connected by a single pipeline system. Such a pipeline improves supply security for the customer while decreasing our delivery costs. Despite the high costs of constructing a pipeline (which costs include obtaining the necessary rights-of-way from owners of property located between the plant and the customer's facility), maintenance costs are low. Our pipeline supply arrangements are generally made under contracts having terms similar to our on-site supply contracts.

        In each of the last three years, the take-or-pay minimum purchase requirements in our on-site and pipeline contracts accounted for approximately 60% to 70% in Germany and approximately 40% to 45% in the United States of the net sales we generated under these supply contracts. These contracts typically have terms of 10 to 15 years and are typically renewed because of the capital-intensive nature of this business.

        Bulk Supply.    We distribute gases in bulk form to customers who require a high volume of industrial gases but do not wish to install an on-site facility and for whom pipeline delivery is not a cost efficient option. The industrial gases most commonly supplied in bulk form are liquid oxygen, nitrogen, argon, carbon dioxide, hydrogen and helium. Bulk supplies are stored on the customer's premises in tanks with capacities ranging between 15 and 150 tons. We own these tanks and lease them to our customers. We deliver gas to our customers by tanker trucks, tube trailers or rail cars and transfer it to the leased tanks. Our bulk customers typically store the product near the point of use, normally in liquid state, and vaporize the product into gaseous state for use as needed. Bulk supplies of oxygen and nitrogen generally have a relatively small commercially viable distribution radius (up to 200 kilometers) from the plants at which they are produced. However, argon and helium are higher-margin products and thus can profitably be shipped much longer distances.

        Our bulk supply contracts in Europe typically have terms of two to three years while our bulk supply contracts in the United States typically have terms of five to seven years. These contracts are frequently renewed, in part because a change of supplier would require a change of equipment.

        Cylinder Supply.    Customers requiring small volumes of gases (including most specialty gases) are supplied products in cylinders which we typically own and rent to these customers. Cylinders typically have a capacity of 50 liters and vary in pressurization capability. The greater the pressure, the greater the amount of gas in the cylinder and therefore the lower the transport costs per unit of gas. Cylinders may be delivered to the customer's site or picked up by the customer at a filling station or retail location. We generally sell our cylinder gases by purchase orders or by contracts with terms ranging between one to two years in Europe and three to five years in the United States. In the United States, we also sell welding and other equipment related to industrial gas on a retail basis.

Our Operations by Region

Germany

        Germany is the largest industrial gas market in western Europe. With an estimated market share of approximately 31%, we are the second largest producer and distributor of industrial gases in Germany following Linde/AGA, which holds an estimated market share of approximately 38%. As a result of our rapid expansion in the past five years, we have built up substantial capacity, including most recently two new Air Separation Units and a new carbon monoxide plant. One of the new large air separation units became operational in 2001 and the carbon monoxide plant will become operational in 2002. The two new Air Separation Units significantly increase our industrial gas production capacity. Our customer base in Germany is broad and diversified, with more than 150,000 customers. Our top 10 customers in Germany represented only 23% of our total net German sales in the year ended 2001. As of December 31, 2001, we had 2,244 employees in Germany.

        On-site and Pipeline Business.    Our on-site and pipeline business unit serves more than 40 customers. Our top eight on-site and pipeline customers accounted for approximately 80% of on-site and pipeline sales in Germany in the year ended 2001. These customers include Hoesch Krupp Mannesmann, Thyssen, Bayer, Erdöl Chemie, Dillinger Hütte, Saarstahl, Celanese and DEA. Our long-term contracts in this business unit typically contain take-or-pay minimum purchase requirements, which accounted for approximately 60% to 70% of the net sales generated under these contracts in each of the last three years. Approximately 90% of our on-site and pipeline net sales is generated under long-term contracts (typically 10 to 15 year terms, with 5 to 10 year renewal periods). At year-end 2001, our German on-site and pipeline contracts had an average remaining duration of more than seven years. Over 90% of our on-site and pipeline customers in Germany whose contracts expired over the past five years renewed their contracts with us.

        We own a highly automated 550 kilometer oxygen and nitrogen pipeline network in the Rhine and Ruhr river region, the industrial heartland of Germany, which links six major Air Separation Units. This pipeline is the only oxygen and nitrogen pipeline in the region and is the largest industrial gas pipeline in Germany. We also own a 40 kilometer oxygen and nitrogen pipeline network in the Saar region which links two major Air Separation Units. Together, these pipeline networks primarily serve 30 leading steel and chemical companies. Our pipeline networks provide continuity and security of supply and enable us to maximize utilization of our Air Separation Units, which permits cost-effective gas production. Since 1990, we have spent approximately €270 million to expand and maintain our German pipeline networks and to expand capacity at our existing Air Separation Units connected to our pipelines.

        Bulk Business.    Our bulk business unit in Germany serves customers in a broad range of industries including the food, utilities, chemical, metallurgy and manufacturing industries. Our most important products in this unit by revenue are liquid nitrogen, oxygen, argon, hydrogen and carbon dioxide. Our bulk business in Germany operates with medium-term contracts that typically have terms of two to three years, the maximum term permitted for such contracts under European Union antitrust laws. However, once a customer account is established in this business unit, the customer usually remains a long-term customer. Over 90% of our bulk customers in Germany whose contracts expired over the past five years renewed their contracts with us.

        In order to lower transportation costs and to optimize capacity utilization at our plants, we have entered into product swap arrangements with our competitors for some of our bulk delivery commitments. Under these arrangements, we are able to save transportation costs for deliveries to some of our more remote customers by utilizing the production facilities of other companies. At the same time, we perform a similar function for other companies. We are exploring the possibility of replicating these "swap" arrangements in the cylinder segment and in other geographic markets.

        Cylinder Business.    Our cylinder business unit serves a very broad customer base with approximately 140,000 customers in Germany, and principally sells commodity gases such as oxygen, nitrogen, argon and acetylene. Approximately 30% of our net sales in this business in 2001 consisted of cylinder rental fees. Contracts in this business typically have one-year terms.

        Specialty Gases Business.    Our customer base in our specialty gases business unit in Germany is highly diversified. Sales to our top ten customers, which include Textron-Kautex, Bosch, Volkswagen, Degussa, Linde, Inergy and Brucker, accounted for only 13% of net sales in this business unit in 2001. The main products in our German specialty gases business unit are helium in gaseous and liquid form and other specialty gases for electronics applications. We also market and sell equipment used in specialty gas applications, which accounted for approximately 25% of net sales in this business segment in 2001. A small portion of our net sales in this unit in 2001 were exports, primarily to the rest of Europe.

        We operate our specialty gases business in Germany from our specialty gases facility in Krefeld. In total, within this business we sell approximately 300 different specialty gases and gas mixtures that we distribute in cylinders.

North America

        Most of our North American operations are located in the United States, although we operate two cylinder filling stations in Canada. Our North American business has grown considerably over the last decade, in particular in the on-site, pipeline and bulk businesses. Due to our rapid expansion, with more than €300 million in capital expenditures in the past five years, we have available capacity at many plants. We can also expand capacity at 11 plants with only minimal additional capital investment. As of December 31, 2001, we had 1,163 employees in North America.

        On-Site and Pipeline Business.    Our on-site and pipeline business unit operates in over 16 states in the industrial areas of the mid-Atlantic region and the Mississippi River valley, as well as in Texas and California. We own and maintain a total of 18 major on-site Air Separation Units in the United States. Unlike our German pipeline business, our U.S. pipelines do not form an inter-connected network. Instead, we have small pipelines at most of our on-site Air Separation Units that typically connect to one or two customers. Our principal products distributed on-site or by pipeline are oxygen and nitrogen.

        Most of our current on-site and pipeline customers are large, industrial companies in the steel, chemicals, plastics, metal fabrication and paper industries. These customers typically take delivery under long-term contracts with terms of 15 years or more, and they collectively had, at year-end 2001, an average of 10.5 years remaining on their contracts. Our on-site and pipeline contracts in North America typically contain take-or-pay minimum purchase requirements which, in 2001, represented approximately 40% to 45% of the total revenue generated under these contracts. Our top five U.S. on-site and pipeline customers in 2001 were NUCOR, DuPont, AK Steel, General Electric and Condea Vista Chemical. We are not dependent on any particular customer or set of customers in this U.S. business unit. All of this unit's customers whose contracts expired in the past five years renewed their contracts with us.

        Bulk Business.    Our North American bulk business operates in the same geographic area as our on-site and pipeline unit. Within our bulk business, our two largest-volume products are liquid nitrogen and liquid oxygen. We also produce and deliver liquid argon and liquid carbon dioxide in bulk form.

        There is no significant customer concentration in this division with our top ten U.S. bulk customers (including NUCOR, Holnam, NASA, Pepsi, Marathon, International Paper and Goodyear) accounting for approximately 16% of net sales in this unit in 2001. Our bulk contracts in the United States generally have terms of five to seven years. While our bulk contracts do not generally include minimum purchase requirements, they typically include a fixed facility fee that offsets the cost of tank or equipment installation on customers' premises. Over 90% of U.S. bulk customers whose contracts expired in the past five years renewed their contracts with us.

        Cylinder Business.    We conduct our cylinder business in Delaware, Maryland, New Jersey, New York, Pennsylvania and Virginia. Unlike Europe, in the United States a large number of small distributors are active in the cylinder business, some of whom buy in bulk from large distributors and resell in cylinders. We also operate a smaller cylinder business in Canada in Toronto and Montreal.

        Unlike in Europe, our cylinder business in North America includes the sale of equipment required for industrial gas applications. Industrial gas sales accounted for approximately 61% of our North American cylinder sales in the year ended 2001, with equipment sales (principally cutting and welding supplies) accounting for the remaining 39%. In 2001, our four largest customers, E.I. DuPont, Wakeman Industries, Butler Gas and JLG Industries, accounted for approximately 7% to 8% of our total North American cylinder sales, and the top 500 customers accounted for approximately 50% of our total North American cylinder sales. Our North American contracts for cylinder supply generally have terms of two to five years.

Western Europe (other than Germany)

        As most western European markets are dominated by one or more of our competitors, we have followed a niche strategy in this region, based on perceived opportunities in specific countries. Our most important markets by net sales in this region are the United Kingdom, France and Belgium. We also have smaller operations in Switzerland, the Netherlands, Italy and Spain. Our principal products in this region are nitrogen, oxygen, carbon dioxide, specialty gases and argon. We primarily operate in the bulk and cylinder segments within these markets, servicing customers in a broad range of industries including the food, steel, chemical, construction and metal industries. We also maintain non-cryogenic on-site plants at some customers' premises. In addition, we operate a 90 kilometer oxygen and pipeline network in the petrochemical industrial area of Tarragona in northeastern Spain.

        Our top eight customers in this region accounted for less than 3% of our total net sales for this region in 2001, and no single customer in any country in western Europe accounted for more than 1% of total net sales in the region. Our bulk contracts in western Europe typically have terms of two to three years, the maximum term permitted for such contracts under European Union antitrust laws, and cylinder contracts typically have terms of one to five years. We estimated that over 80% of our customers whose bulk contracts expired over the past five years in western Europe renewed their contracts with us.

        In the United Kingdom, we are active in both the cylinder and bulk businesses and derive a substantial part of our net sales from the sale of carbon dioxide. A significant portion of our net sales in the United Kingdom is generated from cylinder deliveries to retail establishments for tap sales of soft drinks and beer. In addition to bulk and cylinder gas sales, we also install drink dispenser units in pubs to produce carbon dioxide and nitrogen mixtures for pumping beer from the barrel to the tap.

        In France, we operate in all business segments with a particular focus on carbon dioxide in the bulk business and the cylinder business. Our French cylinder business is supported by a speciality gas facility near Paris. In Belgium, we have a cylinder business with a speciality gas plant close to Brussels. In Switzerland, we are active in the cylinder and bulk segments and operate one nitrogen on-site facility and one hydrogen plant. We also distribute technical equipment, machinery, tools and accessories for the welding industry.

        As of December 31, 2001, we had 1,017 employees in Western Europe.

Eastern Europe

        We operate throughout central and Eastern Europe. We have leading positions in several countries in this region with estimated market shares ranging from 45% to 85% in Hungary, Slovakia, Slovenia, Croatia, Bulgaria, Bosnia and Yugoslavia. We also have a strong position in Austria with an estimated market share of approximately 18%. Our most important markets by net sales in this region are Austria, Czech Republic, Hungary, Yugoslavia and Poland. We also have smaller operations in Bosnia-Herzegovina, Bulgaria, Estonia, Greece, Latvia, Macedonia, Romania, Russia and Turkey.

        We are the market leader in both Yugoslavia and Hungary where we are active in all market segments including on-site and pipeline, bulk and cylinder. In Austria, we also compete in all three market segments. In Poland, we compete primarily in the bulk and cylinder segments. Throughout eastern Europe, we serve a broad range of industries, including customers in the food, steel, mining, chemicals and metal industries.

        Our on-site contracts in this region typically have terms ranging between 8 to 15 years with take-or-pay minimum purchase requirements. Our bulk contracts in this region typically have terms ranging between 3 to 10 years, and cylinder contracts typically have terms ranging between one to two years. Over 90% of our on-site and pipeline, bulk and cylinder contracts which expired over the past five years in eastern Europe were renewed with us.

        The industrial gas market in eastern Europe is generally less mature than in western Europe and the United States, and the competitive environment in this region is more dynamic as a result. We believe that this region offers attractive growth prospects.

        As of December 31, 2001, we had 2,369 employees in Eastern Europe.

Operations Divested and to be Divested

        We intend to divest substantially all of our assets and operations outside our core regions of Europe and North America, other than our joint ventures in China, as well as certain non-strategic assets and operations within our core regions, by year-end 2002. Upon completion of the entire divestiture program, we expect that the divestitures will permit us to reduce our consolidated debt reflected on the December 31, 2000 balance sheet by at least €400 million.

        During the eight month period ended December 31, 2001, pursuant to the divestiture program, we completed disposals of our home care business in Germany, our health care business in Canada and our non-cryogenic plant production operations in Germany, the United States, Italy and China. We also completed disposals of our operations in Argentina, Brazil, Mexico, South Africa and South Korea, our nitric oxide business in Germany, and our carbon dioxide business in the United States.

        The remaining divestitures of certain of our assets and operations may require additional expenditures prior to their disposal.

Asia and Africa

        We have sold our operations in Egypt. See Item 4A "History and Development of Messer Griesheim and Messer Holding—Recent Developments."

        We operate in China through eight directly owned joint ventures as well as through interests in eight joint ventures that are held by Aventis (China) Investment Co. Ltd., and managed by employees of Messer Griesheim. Approximately half of our 2001 sales in China were in the on-site and pipeline segment, with bulk and cylinder sales accounting for the remainder. Typically, our on-site and pipeline operations in China have one main customer for each facility who accounts for between 60% to 90% of sales from that facility. These relationships are governed by contracts that typically have terms of 10 to 15 years.

        In Singapore, we operate both bulk and cylinder businesses. In 2001, our primary products in Singapore were argon, carbon dioxide, helium, nitrogen and oxygen. We also sell specialty gases to the local research, laser, medical and electronics industries. Through Singapore Syngas, our joint venture with Texaco, we have completed a large synthetic gas production facility on Jurong Island, a petrochemical hub in Asia.

        Our next largest markets by net sales in 2001 were India and Indonesia. We also have smaller operations in several other countries in Asia and Africa. As of December 31, 2001, we had 1,139 employees in Asia and Africa.

        Our ability to divest certain of our assets in India as planned will first require resolution of disputes with various parties relating to our investments in those assets, as discussed under Item 8. "Financial Information—8.A. Consolidated Statements and Other Financial Information—8.A.7 Legal Proceedings" below.

Latin America

        We are in the process of disposing of our business in Trinidad & Tobago, subject to third party consents and regulatory approvals as well as other closing conditions.

        We are the largest industrial gas company in Trinidad and Tobago. It was also our largest market by net sales in this region where we supply industrial gases primarily to customers in the petrochemical industry. Overall, many of our operations in Latin America are heavily leveraged. With the exception of Trinidad and Tobago, we have low market shares in this region due to our relatively recent entry.

        We also have smaller operations in over six other countries in Latin America. As of December 31, 2001, we had 416 employees in Latin America.

Other Potential Divestitures

        Separately from our divestiture program, in light of unstable political conditions in certain countries or the prevalence of business practices in those or other countries which are inconsistent with the standards we apply generally in our core markets and operations, we may decide to sell or discontinue operations in those countries, including operations that would otherwise be viewed as strategic assets within our core markets.

Sales and Marketing

        As of December 31, 2001, we had a global sales force of approximately 2,500 employees, approximately 45% of whom were located in Europe and 15% in North America. We organize our sales and marketing activities differently in each country.

        In Germany, we have historically organized our sales and marketing activities along business unit lines with separate sales forces for the on-site and pipeline, bulk, cylinder, speciality gases and medical business units. Recently, however, we reorganized some of these activities by combining the bulk, cylinder and specialty gases sales forces. We now have one sales force, operating through three regional sales teams covering these three product segments in Germany. In addition, we have, through a joint venture with Nippon Sanso (of which we own 51%), a sales team specialized in servicing the electronics industry.

        In the rest of Europe, we typically organize our sales and marketing along business unit lines within each country. However, in some countries in the region, we recently reorganized these activites as in Germany.

        In North America, we have two principal sales forces, one of which markets for our on-site and pipeline unit and the other for our bulk and cylinder units. In the rest of the world, we generally have one sales force marketing all our products in each country.

        We now separately market and sell application technology-related services. To this end, we have created a global applications and technology group that supports our local sales and marketing activities. Application sales are organized by regional industry segments, which include the metal, chemical and environmental, food and process industries.

Insurance

        Our major insurance programs cover all operations outside the United States and Canada. A separate program covers operations in the United States and Canada. We believe that our insurance arrangements (including the uninsured portion of our risks) regarding property, liability and environmental risks are adequate and in line with market practice in each of our core markets. However, we cannot assure you that changes in the terms and amount of insurance available will not have an adverse effect on our business, results of operations or financial position.

        The largest product liability occurrences we have suffered in the last five years related to carbon dioxide that Messer Griesheim purchased from third parties and sold to its clients which was contaminated with benzene. Total claims for this incident currently amount to appromixately €15.9 million, 100% of which is expected to be covered by our insurance policies. In general, our property claims experience has been favorable and infrequent. The largest property loss which we sustained on a global basis was attributed to an oxygen pipeline explosion which took place in 1995 at a location near Cologne, Germany. Claims relating to this incident amounted to approximately €6.1 million in damages. Approximately 70% of these damages were covered by our insurance policies.

4.C ORGANIZATIONAL STRUCTURE

        We are a multinational group of companies, with our core markets in Europe and North America, specializing in the production and distribution of industrial gases, including oxygen, nitrogen, argon, carbon dioxide, hydrogen, helium, specialty gases and acetylene. Messer Holding, a German holding company, owns, directly or indirectly, 100% of all significant operating companies. Messer Holding was a dormant company until it was activated to become a holding company.

        The following diagram shows our ownership structure as of December 31, 2001.

(1)

The holding company for the Messer family's interests in Messer Griesheim.

(2)

Certain private equity funds managed by affiliates of The Goldman Sachs Group, Inc.

(3)

Principal operating company in Germany and holding company for the remainder of our operation.

(4)

Messer Griesheim Group owns 100% of Messer Holding, 33¹/3% of which is owned directly and 66²/3% of which is owned through a wholly-owned holding company.

        Our significant subsidiaries as of December 31, 2001 are set forth below.

4.D PROPERTY, PLANTS AND EQUIPMENT

        We own our principal operational offices, which are located in Krefeld, Germany, Malvern, Pennsylvania and Gumpoldskirchen, Austria. In line with our strategy to centralize key business processes, we have recently relocated our worldwide headquarters from Frankfurt to Krefeld, which is also the current operations and research base in Germany.

        It is our policy to own our facilities. A portion of our facilities located in Germany and United Kingdom are leased under long term leases.

        As of December 31, 2001, worldwide, we own:

•

80 cryogenic Air Separating Units, 45 of which are located in our core markets;

•

47 cryogenic generators, all of which are located in our core markets;

•

680 kilometers of pipeline in our pipeline networks, all of which are located in our core markets;

•

18 carbon dioxide plants, 11 of which are located in our core markets;

•

11 hydrogen plants, 8 of which are located in our core markets; and

•

23 acetylene plants, 9 of which are located in our core markets.

        Additionally, we also own numerous non-cryogenic plants, liquefiers and cylinder filling stations.We believe that our production plants and research facilities are well maintained and generally adequate to meet our needs for the foreseeable future.

        Below is a summary that sets out our major production facilities.

Regulation and Environmental Matters

        We are subject to laws and regulations relating to the protection of the environment and natural resources including, among other things, the management of hazardous substances and waste, air emissions and water discharges. Modern industrial gas production methods do not have a significant impact on the environment when compared to other industries such as chemical manufacturing. We are also subject to health and safety regulations including, among other things, noise, workplace health and safety and regulations governing the handling and packaging of hazardous materials. In general, we do not believe that non-compliance with these regulations represents a material area of potential liability for us. Our capital expenditures for environmental protection totaled approximately €1.9 million in 2001.

        We own several properties that may have been contaminated by us or prior users. Soil and groundwater contamination mainly associated with past activities at some of our sites could represent a potential environmental liability. In addition, capital expenditures may become necessary to reduce the environmental impact of certain operations, such as expenditure to install modern production equipment with lower emission levels.

        In addition to existing regulatory legislation, several legislative initiatives are under consideration that may have an effect on our operations. Energy accounts for a high proportion of our operating costs. There is increasing interest in Europe in encouraging significantly lower energy consumption by introducing levies or taxes. Such levies and taxes were recently introduced in Germany and could be introduced elsewhere in the future.

        Because we supply industrial gases to the medical industry, we are subject to additional regulation in certain of our markets. In particular, we are subject to regulation by the federal Food and Drug Administration in the United States which has recently begun to more stringently enforce its regulation of industrial gases in the medical industry. The expansion of the scope and effect of such regulation in the United States and other markets may have an adverse effect on our operations.

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5.A OPERATING RESULTS

        You should read the following discussion in conjunction with Messer Griesheim's and Messer Holding's financial statements included in this Form 20-F starting on page F-1. Messer Holding's financial statements are prepared in accordance with the International Accounting Standards of the International Accounting Standards Committee, or IAS, which differ in certain significant respects from U.S. GAAP. You can find reconciliations of net income, shareholders' equity and disclosures regarding differences between IAS and U.S. GAAP in note 40 to Messer Holding's consolidated financial statements.

        The Company calculates normalized EBITDA as operating profit before depreciation and amortization, after adding back charges for impairment of intangible assets and property, plant and equipment, restructuring and reorganization charges.

        Normalized EBITDA is not a measure recognized by IAS or U.S. GAAP. This and similar measures are used by different companies for differing purposes and are often calculated in ways that reflect the unique situations of those companies. We urge you to be very cautious in comparing our normalized EBITDA data to the EBITDA data of other companies. Normalized EBITDA is not a substitute for operating profit as a measure of operating results. Likewise, normalized EBITDA is not a substitute for cash flow as a measure of liquidity.

Forward Looking Statements May Prove Inaccurate

        This report contains certain forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by and information currently available to us. These statements include, but are not limited to, statements about our strategies, plans, objectives, expectations, intentions, expenditures, and assumptions as well as other statements contained in this Form 20-F that are not historical facts. When used in this document, words such as "anticipate", "believe", "estimate", "expect", "intend", "plan" and "project" and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate.

        Investors are cautioned that forward-looking statements contained in this section involve both risk and uncertainty. Several important factors could cause actual results to differ materially from those anticipated by these statements. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management.

Overview

        We are a producer and distributor of industrial gases, including oxygen, nitrogen, argon, carbon dioxide, hydrogen, helium, specialty gases and acetylene. The industrial gases we produce are used in a broad range of industries, including the steel, chemicals, electronics, pulp and paper, health-care, food and beverage, automotive, lighting and glass industries. We operate in 49 countries through more than 425 facilities, including production plants, distribution and filling stations and research centers as of December 31, 2001. In 2001, we had an estimated global market share of approximately 5% of the total industrial gases market, making us the seventh largest industrial gas producer worldwide, and leading market shares in Germany and certain other countries in central and eastern Europe. We also have strong businesses in selected industrial areas of the United States and in selected niche markets in other western European countries. In the eight months ended December 31, 2001, we generated net sales of €1,047 million and normalized EBITDA of €245 million and in the four months ended April 30, 2001, our predecessor generated net sales of €574 million and normalized EBITDA of €126 million. However, as noted below, our normalised EBITDA for periods preceding and subsequent to April 30, 2001 are not comparable, due to the consummation of the acquisition transaction on April 30, 2001.

        Our primary or core markets are Europe and North America. Our two largest markets, Germany and North America, collectively accounted for 65.5% of our net sales and 62.1% of our normalized EBITDA for the eight months ended December 31, 2001. Within each of our geographic markets, we generally organize our business based upon how we deliver industrial gases to our customers: delivery of large volumes from on-site production facilities or by pipeline, delivery in bulk tanks transported by truck or rail and delivery in gas cylinders. In addition to our core markets of Europe and North America, we also operate in Asia, Africa and Latin America. We are in the process of divesting of substantially all of the assets outside our core markets, along with certain non-strategic assets in our core markets. Other than our joint ventures in China, we intend to complete these divestitures by year-end 2002.

Acquisition Transactions, Refinancing and Divestiture Program

        As discussed elsewhere in this report, the acquisition transactions have been accounted for at fair value and, accordingly, our assets and liabilities have been recorded at their estimated fair values as of April 30, 2001, the date of the acquisition transactions. As a result, the consolidated financial statements of Messer Griesheim for periods prior to the acquisition transactions are not comparable to our consolidated financial statements for periods subsequent to the acquisition transactions. To highlight this lack of comparability, a solid vertical line has been inserted, where applicable, between columns in the tables and schedules of this document, and in our consolidated financial statement to distinguish information pertaining to the pre-acquisition and post-acquisition periods.

The Acquisition of Messer Griesheim

        Prior to the completion of the acquisition transactions described below, Messer Griesheim was owned:

•

33¹/3% by the Messer family through a holding company, Messer Industrie GmbH, and



•

66²/3% by Hoechst AG, a subsidiary of Aventis S.A. Aventis was formed in December 1999 as the result of the merger of Hoechst AG and Rhone-Poulenc S.A., two of Europe's largest chemical companies.

        On December 31, 2000, Messer Industrie, Hoechst and our parent company Messer Griesheim Group, entered into certain acquisition transactions.

        As a result of the acquisition transactions, Messer Holding owns 100% of Messer Griesheim and Messer Holding is wholly owned by Messer Griesheim Group. Messer Holding and Messer Griesheim Group are both holding companies with no material assets other than their direct or indirect interests in Messer Griesheim (and, in the Messer Holding's case, the payments under the intercompany loan to Messer Griesheim). As a result of the completion of the acquisition transactions, Messer Griesheim Group is owned as of December 31, 2001:

•

32.67% by the Messer family, through Messer Industrie;



•

33.665% by Allianz Capital Partners; and



•

33,665% by six private equity funds managed by affiliates of The Goldman Sachs Group, Inc.

        In connection with these acquisition transactions, the shareholders of Messer Griesheim Group entered into a shareholders' agreement governing their respective voting control and other ownership rights with respect to Messer Holding and Messer Griesheim. See Item 7. "Major Shareholders and Related Party Transactions—Major Shareholders—Shareholders' Agreement."

Transaction Structure

        The following diagram shows our ownership structure and the structure of our principal indebtedness as of December 31, 2001 following completion of the acquisition transactions on or about April 30, 2001, reflecting the issuance of the senior notes and the refinancing of our indebtedness to the extent completed, including repayment in full of the €400 million mezzanine bridge facility and repayment of €115 million of our senior term facilities.

(1)

The holding company for the Messer family's interests in Messer Griesheim.

(2)

Certain private equity funds managed by affiliates of The Goldman Sachs Group, Inc.

(3)

Principal operating company in Germany and holding company for the remainder of our operations.

(4)

€550.0 million aggregate principal amount.

(5)

Messer Griesheim Group owns 100% of Messer Holding, 33¹/3% of which is owned directly and 66²/3% which is owned through a wholly-owned holding company.

(6)

€1,340 million was the initial aggregate amount of term loan facilities. Messer Griesheim repaid €115 million principal amount of senior term facilities on or about May 16, 2001 with a portion of the proceeds from the sale of the senior notes. As of December 31, 2001, €925.7 million aggregate principal amount remained outstanding under the senior term facilities. The senior facilities also include committed but not fully drawn funds totaling €310 million under revolving facilities. Certain of Messer Griesheim's subsidiaries are also direct borrowers under the senior facilities. For a description of the Refinancing Program see—Item 4. "Information on the Company—4.A History and Development of Messer Griesheim and Messer Holding".

Refinancing Program

        In connection with the acquisition transactions described above, substantially all of Messer Griesheim's existing indebtedness was refinanced through the senior notes and the senior facilities described below. Upon the initial closing of the acquisition, Messer Griesheim entered into a senior facilities agreement with aggregate available funds of €1,650 million (€1,340 million of term loan facilities and €310 million of revolving facilities) and a mezzanine bridge facility agreement in the aggregate amount of €400 million. On May 16, 2001, the Company issued €550 million principal amount of 10.375% senior notes maturing on June 11, 2011. Upon the closing of the sale of the senior notes, Messer Holding made an intercompany loan to Messer Griesheim with the gross proceeds from the senior notes, and Messer Griesheim used the intercompany loan to repay the mezzanine bridge facility in full and repay €115 million principal amount of outstanding term borrowings under the facilities.

Business Practices

        We believe the following selected business practices are important for a proper understanding of our financial reporting risks.

Net Sales

        We primarily earn revenues from

•

sales of industrial gases, and



•

sales of hardware related to industrial gas usage.

        Our sales of industrial gases, which amount to greater than 90% of our total revenue, are divided into three business units corresponding to their mode of delivery: on-site and pipeline sales, bulk delivery sales and cylinder delivery sales. Contracts in our on-site production and pipeline supply businesses in Europe and the United States typically have terms of 10 to 15 years and usually have "take-or-pay" minimum purchase provisions. In each of the last three years, the "take-or-pay" minimum purchase requirements in our on-site and pipeline supply contracts accounted for approximately 60% to 70% in Germany and 40% to 45% in the United States of the total amount of net sales that we generated under these contracts.

        Contracts in our bulk business generally have terms of two to three years in Europe and five to seven years in the United States. Customers in our on-site and pipeline and bulk businesses have historically exhibited high renewal rates, with over 90% of customers whose contracts expired in the past five years renewing their contracts with us. Our on-site, pipeline and bulk businesses in Germany and the United States accounted for approximately 34% of our total net sales. We generally sell our cylinder gases by purchase orders or by contracts with terms ranging between one to two years in Europe and three to five years in the United States.

        Our net sales are dependent on the economic conditions in the markets in which we operate. However, we believe that we have limited exposure to the cyclical nature in demand of any particular industry because of the wide diversity of industries represented by our customer base.

        Although industrial gas prices appear to have recently stabilized in many of the markets in which we operate, prices have consistently decreased for at least the last 10 years, especially in the bulk and commodity gas cylinder segments, due to aggressive efforts by most producers to increase market share. The profit margin impact of this price erosion has been partially offset by efficiency improvements throughout the supply chain and regional consolidation among large participants in the industry, permitting economies of scale. In addition, new applications for industrial gases have increased sales volumes and profit margins.

Cost of Sales

        Our principal raw material is air, which is free and which we separate into its component gases. Cost of sales principally consists of:

•

capital costs of plants;



•

costs of energy required for production; and



•

labor costs relating to production.

        Energy costs consist principally of electrical power costs. Electricity represented approximately 27% of our cost of sales in 2001. We are able to pass on a portion of increases in energy costs to many, but not all, of our on-site and pipeline customers with long-term supply contracts, although these adjustments in cost often occur only on an annual basis. The amount and other terms of these energy cost pass-through provisions vary by contract.

        Labor costs relating to production consist principally of wages and salaries, social security contributions and other expenses related to employee benefits. Social security contributions include our portion of social security payments, as well as our contributions to workers' insurance associations.

        We depreciate fixed assets on a straight-line basis. Our depreciation rates assume a useful life of 10 to 50 years for buildings, 10 to 20 years for plant and machinery and 3 to 20 years for other plant, factory and office equipment.

Divestiture Program

        Our core markets are Europe and North America. In May 2001 immediately following our change of ownership resulting from the acquisition transactions described elsewhere in this Form 20-F, we adopted a divestiture program. Pursuant to the divestiture program, we intend to sell substantially all of our assets and operations in our non-core markets in Asia, Africa and Latin America, as well as certain non-strategic assets and operations in our core markets. The proceeds from the divestiture program will be used to reduce our consolidated debt.

        During the eight month period ended December 31, 2001, pursuant to the divestiture program, we have completed disposals of our home care business in Germany, our health care business in Canada and our non-cryogenic plant production operations in Germany, the United States, Italy and China. We have also completed disposals of our operations in Argentina, Brazil, Mexico, South Africa and South Korea, our nitric oxide business in Germany, and our carbon dioxide business in the United States.

        The remaining divestiture of certain of our assets and operations may require additional expenditures prior to their disposal.

Cost-Savings Plan

        We are implementing a plan to reduce our operating costs, principally in Europe. This plan involves eliminating duplication in support positions for certain process functions, reducing energy costs, centralizing key process functions and simplifying our management structure. We have identified most of the specific cost savings measures that we expect to achieve by year-end 2003. We expect these will reduce the cost base of our operations in our core markets relative to its level for the year 2000 by approximately €100 million by year-end 2003. To implement these measures, we expect to spend in total approximately €84 million between April 30, 2001 and year end 2003, principally to be applied towards severance payments and efficiency improvements.

        For the eight month period ending December 31, 2001, we have reduced the cost base of our operations in our core markets relative to its level for the year 2000 by €27.0 million. As a result of implementation of these measures we incurred total one-time cost of approximately €25.3 million (excluding €12.5 million of costs that were included as part of the purchase price accounting adjustments) for the eight month period ended December 31, 2001. We expect to incur an additional €46.6 million of one-time costs within the next two years.

Critical Accounting Policies

        The results of our operations and financial condition are dependent upon the utilization of accounting methods, assumptions and estimates that are used as a basis for the preparation of the consolidated financial statements. We have identified the following critical accounting policies and related assumptions, estimates and uncertainties, which management believes are essential to understanding the underlying financial reporting risks and the impact that these accounting methods, assumptions, estimates and uncertainties have on our reported financial results. This information should be read in conjunction with the Consolidated Financial Statements and this "Item 5.—Operating And Financial Review and Prospects" included elsewhere in this Form 20-F.

Purchase Accounting

        We accounted for the acquisition transactions similar to that of an acquisition of Messer Griesheim by Messer Holding. The accounting for this acquisition resulted in a significant amount of long-lived intangible as sets. Our accounting policy relating to purchase business combinations requires the use of the purchase method whereby the purchase price is allocated to identifiable tangible and intangible assets based upon their fair value. The allocation of purchase price is judgmental and requires the extensive use of estimates and fair value assumptions, which can have a significant impact on operating results. Changes in the industry conditions, technological advances and other economic factors could result in revisions to the judgments, estimates and valuation techniques utilized in the application of purchase accounting. Such differing allocations could impact future operating results.

Recoverability of Long-Lived Assets

        Our business is capital intensive and, historically, required a significant investment in property, plant and equipment. At December 31, 2001, the carrying value of our property, plant and equipment was €1,698 million. At December 31, 2001 long-lived intangible assets amounted to €853 million. We review long-lived assets, including intangible assets, for impairment whenever events or changes in circumstance indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying value of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets. Estimated fair value is generally based on either appraised value or by discounted estimated future cash flows.

        A continuation of the currently competitive economic conditions in the industrial gas industry could result in an increasingly adverse pricing environment due to significant industry over-capacity. This could result in decreased production and reduced capacity utilization. Such events could result in reductions of future estimates of net cash flows expected to be generated to the extent that both long-lived tangible and intangible assets could be considered impaired, negatively impacting future operating results.

Recoverability of Investments in Subsidiaries Available for Sale

        We have made a series of investments in, and advances to, companies that are principally engaged in the manufacture, sale and distribution of industrial gases which are located in regional markets which we not longer consider part of our core markets. At December 31, 2001, the carrying amounts of investments in subsidiaries available for sale aggregate €42 million. Our accounting policy is to record an impairment of such investments to net realizable value when the decline in fair value below carrying value is other than temporary. In determining if a decline in value is other than temporary, we consider the length of time and magnitude of the excess of carrying value, the forecasted results of the investee, the economic environment in the regional market and our ability and intent to hold the investment.

        A slump in demand for industrial gases could adversely impact the operations of these investments to generate future net cash flows. Furthermore, since these investments are not publicly traded, further judgments and estimates are required to determine their fair value. As a result, potential impairment charges to write-down such investments to net realizable value could adversely affect future operating results.

Realization of Deferred Tax Assets

        At December 31, 2001, total net deferred tax assets approximated €198 million. Included in this total are the benefit of net operating loss and tax credit carry forwards of approximately €130 million. Such tax loss and credit carry forwards generally do not expire under current law, except certain amounts attributable to operations in the United States that expire in 20 years. Realization of these amounts are dependent upon the generation of future taxable income at a level sufficient to absorb the loss and credit carry forwards. These deferred tax assets were recognized to the extent that it is probable that future taxable profit will be available. The amount of total deferred tax assets considered realizable prospectively could be reduced if our estimates of projected future taxable income are lowered from present levels or changes in current tax regulations are revised which could impose restrictions on the time or extent of our ability to utilize tax loss and credit carry forwards in the future.

Restructuring Charges

        Subsequent to the acquisition transactions, the management approved plans to restructure the Group and reduce costs. These changes were intended to, among other things, improve operational efficiencies and improve profitability. While the management approved a detailed restructuring plan, the calculation of the provision requires the use of estimates and management judgment. Additionally, if industry conditions continue to deteriorate or an economic downturn is experienced in the future, further restructuring charges may be incurred. Resulting variances from estimates previously utilized may adversely impact future financial results.

Reclassifications

        Certain reclassifications have been made to the presentation of prior periods to conform to the current period classifications.

Results of Operations

        The following table sets forth a summary of our results for the eight month period ended December 31, 2001, the four month period ended April 30, 2001 and the twelve month period ended December 31, 2000.

        As discussed elsewhere in this Form 20-F, the acquisition transactions have been accounted for at fair value and, accordingly, our assets and liabilities have been recorded at their estimated fair values as of April 30, 2001, the date of the acquisition transactions. As a result, the consolidated financial statements of Messer Griesheim for periods prior to the acquisition transactions are not comparable to our consolidated financial statements for periods subsequent to the acquisition transactions. To highlight this lack of comparability, a solid vertical line has been inserted, where applicable, between columns in the tables of selected financial data, in our financial statements and elsewhere in this Form 20-F to distinguish information pertaining to the pre-acquisition and post-acquisition periods.

(1)

Amounts include total net of research and development costs, other operating income, other operating expense, impairment of intangible assets and property, plant and equipment and restructuring and reorganization charges.

Major Events

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On April 30, 2001, a series of acquisition transactions were consummated as described elsewhere in this Form 20-F which resulted in a change in the ownership of Messer Griesheim and Messer Holding. In connection with the acquisition transactions, substantially all of Messer Griesheim's existing indebtedness was refinanced. Additionally, following the acquisition transactions, we adopted in May 2001 a divestiture program pursuant to which we intend to sell substantially all of our assets and operations in our non-core markets, located in Asia, Africa and Latin America, as well as certain non-strategic assets and operations in our core markets generally by the end of calendar year 2002.



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For the eight month period ended December 31, 2001, we have divested a significant portion of our assets and operations. Pursuant to the divestiture program, as of December 31, 2001, the consummated dispositions resulted in debt relief (including deconsolidated debt as a result of the divestiture program) of approximately €234 million. Agreements for additional dispositions provide for an additional €73 million of debt relief, resulting, upon consummation, in aggregate consolidated debt relief as of December 31, 2000 of €307 million.



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For the eight month period ended December 31, 2001, we have reduced our capital expenditures to no more than 10% of our total net sales, and intend to maintain such reduced level of capital expenditures for the foreseeable future. Our capital expenditures in the future will be focused on making modest additions to our existing investments in our core markets that will allow us to exploit the full potential of earlier investments.



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For the eight month period ended December 31, 2001, we have reduced the cost base of our operations in our core markets relative to its level for the year 2000 by €27.0 million. As a result of implementation of these measures, we incurred total one-time costs of approximately €25.3 million (excluding €12.5 million of costs that were included as part of the purchase price accounting adjustments) for the eight month period ended December 31, 2001 and expect to incur an additional €46.6 million within the next two years.

Eight months Ended December 31, 2001

        Management believes that the following material trends have affected our continuing operations for 2001. Net sales in Germany benefited from increased sales volume in our gas business. This benefit was offset by lower prices resulting from ongoing strong competition in response to market conditions and the overall worsening economic conditions in Germany, particularly in the fourth quarter 2001. The sales volume and operating profit of our business in North America declined, reflecting the adverse effects of the continuing economic downturn in U.S. markets, especially subsequent to the September 11, 2001 events, as well as higher energy costs. The development in Western Europe, excluding Germany, was different. The slight decline in net sales in the UK due to lower sales to the food and beverage industry was offset by higher sales, mainly in Spain and Italy. In Eastern Europe, net sales increased significantly throughout the entire region as a result of significant new business generated.

        Overall, a deteriorating economic environment, the reduction of global demand, highlighted by the downturn in the industrial gas industry and overcapacity in the chemical industry, influenced the business in 2001. In addition, the operating profit of the eight month period ended December 31, 2001 includes, beside the impact of the above mentioned one-time costs of approximately €25.3 million, additional depreciation charges related to the purchase price allocation of approximately €33.7 million and amortization of goodwill amounting to approximately €19.5 million.

Eight Months Ended December 31, 2001 Compared with four Months Ended April 30, 2001

        As a result of the acquisition transactions (including the change in cost basis resulting therefrom), the refinancing program and the divestiture program, and the fact that the periods ended December 31, 2001 and April 30, 2001 are for periods of eight months and four months, respectively, the management does not believe that a comparison of such periods is meaningful.

Four Months Ended April 30, 2001 Compared with Twelve Months Ended December 31, 2000

        As a result of the fact that the periods ended April 30, 2001 and December 31, 2000 are for periods of four months and twelve months, respectively, the management does not believe that a comparison of such periods is meaningful.

Three Months Ended December 31, 2001 Compared with Three Months Ended December 31, 2000

        The following table sets forth a summary of Messer Griesheim's results of operations for the three month periods ended December 31, 2001 and 2000, in terms of amounts as well as a percentage of net sales. When comparing these three month periods, consideration should be given to the impact on comparability arising from the acquisition transaction, the refinancing program, the divestiture program and the other developments described above. As a result of these events, comparability is impacted by a number of factors, the most significant of which are (i) the new cost base of the Company's assets and liabilities as a result of the acquisition program, (ii) the refinancing program and the resulting impact on financing costs and (iii) the divestiture program. All of these factors impacted the results only for the three month period ended December 31, 2001.

(1)

Amounts include total net of research and development costs, other operating income, other operating expense, impairment of intangible assets and property, plant and equipment and restructuring and reorganization charges.

        Net sales.    Net sales decreased by 14.2% to €387.0 million in the fourth quarter 2001 from €451.0 million in the same period 2000 and are shown by business areas below:

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Net sales in Germany decreased 13.4% to €164.7 million in the fourth quarter 2001 from €190.2 million in the same period 2000. This decrease is primarily due to the disposed businesses Homecare and Mahler (€6.0 million) and lower engineering activities from Messer AGS (€4.1 million). Furthermore, the fourth quarter 2000 includes a sale of an air separation unit of €6.2 million. Excluding these effects, net sales decreased by 5.3% from €173.9 million to €164.7 million due to falling gas prices, mainly in the cylinder business, as a result of the strong competition.



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Net sales in Western Europe (excluding Germany) decreased 5.8% to €64.7 million in the fourth quarter 2001 from €68.7 million in the same period 2000. This decrease is principally due to decreased sales volumes primarily in the United Kingdom and to a lesser extent in the Netherlands as well as Switzerland. This decrease was partially offset by increased sales in Spain and Italy. The UK performance has been negatively impacted by the loss of two large drink

dispense customers as well as the decision to move from direct delivery to wholesalers. Furthermore, in the fourth quarter 2000, sales in the U.K. were driven by an extra engineering turnover. On the other hand, sales in Spain and Italy increased due to the new entry in the cylinder business in Spain, as well as a decline in the price war in the Italian market compared to the same period 2000.

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Net sales in Eastern Europe increased 54.2% to €53.5 million in the fourth quarter 2001 from €34.7 million in the same period 2000. Sales volumes in almost all countries in the region increased compared to the same period 2000. The main sales increase in sales arose from our businesses in Austria, Poland, Hungary and the Czech Republic, where significant new business has been generated. This development confirms our leading position the position in Eastern Europe.



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Net sales in North America decreased 7.6% to €94.8 million in the fourth quarter 2001 from €102.6 million in the same period 2000. This decrease principally results from the €5.5 million reduction in net sales as a result of the divestiture program, and is partially offset by the appreciation of the U.S. dollar against the Euro in the fourth quarter 2001. Excluding the effects of the business disposal in the fourth quarter 2001 and appreciation of the U.S. dollar, net sales decreased by 5.8% from €97.1 million in the fourth quarter 2000 to €91.5 million in the fourth quarter 2001. This decrease is mainly caused by lower sales volumes in all business areas as a result of the recession in the U.S., especially subsequent to September 11, 2001.



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Net sales in Other Business Areas decreased €40.8 million to €8.5 million in the fourth quarter 2001 from €49.3 million in the same period 2000. This decrease primarily results from the divestiture program which resulted in the de-consolidation of our subsidiaries in Mexico, Brazil, Argentina, Peru, Venezuela, Trinidad & Tobago, South Africa, Singapore, Korea and Indonesia as of April 30, 2001. Therefore, the figures are not comparable.

        Cost of sales.    Cost of sales decreased 15.0% to €207.6 million in the fourth quarter 2001 from €244.1 million in the same period 2000. Cost of sales consist primarily of raw material costs (e.g. energy), purchased parts and direct labor, as well as manufacturing overheads and depreciation.

        The change of cost of sales is influenced to the amount of €12.7 million by additional depreciation due to step ups related to the purchase price allocation. Excluding the impact of the purchase price allocation, cost of sales decreased by 20.2% to €194.9 million in the fourth quarter 2001. This decrease is caused by lower sales compared to the fourth quarter 2000 including the effect of the de-consolidation. These effects are partially offset by higher energy costs in the United States that could not be passed on to customers.

        Distribution and selling costs.    Distribution and selling costs consist primarily of sales organization costs, transport of gases and cylinders from the production site or filling station to the customer, depreciation of the cylinders and tanks at the customer site, advertising and sales promotions, commissions and freight.

        General and administrative costs.    General and administrative costs consist primarily of personnel costs attributable to general management, finance and human resources functions, as well as other corporate overheads.

        Operating profit (loss).    Operating loss decreased to €1.8 million in the fourth quarter 2001 from €12.1 million in the same period 2000.

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In Germany we incurred an operating profit of €9.0 million in the fourth quarter 2001 compared to an operating profit of €36.6 million in the same period 2000. The operating profit in the fourth quarter 2001 includes additional depreciation and amortization of €11.1 million related to the purchase price allocation which were not incurred in the three month period ended December 31, 2000. Furthermore, the fourth quarter 2000 includes a profit from the sale of property in the amount of €8.3 million. Excluding these effects, operating profit decreased from €28.3 million by €8.2 million to €20.1 million. This decrease results primarily from lower sales.



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In Western Europe (excluding Germany) we incurred an operating profit of €0.9 million in the fourth quarter 2001 compared to an operating profit of €3.0 million in the same period 2000. The operating profit in the fourth quarter 2001 includes additional depreciation and amortization of €2.2 million related to the purchase price allocation as well as restructuring and reorganization charges of €1.3 million which were not incurred in the three month period ended December 31, 2000. Excluding these effects, operating profit increased by 50.0% to €4.5 million in the fourth quarter 2001. This increase was principally due to higher sales volumes and generally stable prices in the fourth quarter 2001. Specifically, the curtailment of the price war on the Italian market, successful start-up of the cylinder business in Spain and a continued decrease of the cost base in the U.K. in accordance with our cost savings program contributed to this improvement.



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In Eastern Europe we incurred an operating loss of €0.3 million in the fourth quarter 2001 compared to an operating profit of €1.5 million in the same period 2000. The operating loss in the fourth quarter 2001 included additional depreciation and amortization of €1.0 million related to the purchase price allocation, as well as restructuring and reorganization charges of €4.3 million, primarily due to reorganization program in Yugoslavia. Excluding these effects, operating profit increased by €3.4 million to €4.9 million in the fourth quarter 2001. This increase in operating profit primarily results from effective cost management actions, specifically in Austria, Poland and Czech Republic.



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In North America we incurred an operating profit of €0.3 million in the fourth quarter 2001 compared to an operating loss of €7.9 million in the same period 2000. The operating profit in the fourth quarter 2001 includes additional depreciation and amortization of €3.9 million related to the purchase price allocation as well as restructuring and reorganization charges of €1.2 million compared to €7.7 million restructuring and reorganization charges and €9.5 million impairment charges in the fourth quarter 2000. Excluding this effects, operating profit decreased by €3.9 million to €5.4 million in the fourth quarter 2001. This decrease was principally due to

lower sales volume resulting from the recession in the U.S. and higher energy costs which impacts cost of sales as well as distribution costs.

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Operating loss in Other Business Areas decreased to a loss of €1.6 million in the fourth quarter 2001 from a loss of €18.2 million in the same period 2000. This improvement results primarily from the deconsolidation of loss making companies as well as from sales from plants that came on stream in the same period 2000, partially offset by delays in the start-up of certain new plants in Latin America. These delays required us to make compensating gas purchases from competitors to meet our existing contractual obligations to our customers. However, figures are not comparable owing to the de-consolidation of companies in Mexico, Brazil, Argentina, Peru, Venezuela, Trinidad & Tobago, South Africa, Singapore and Indonesia as of April 30, 2001.



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Operating loss in Reconciliation/Corporate amounted to €10.1 million in the fourth quarter 2001 compared with an operating loss of €27.1 million in the same period 2000. The increase is mainly due to payments to executives upon termination of the Group's long term incentive plan in the fourth quarter 2000.

        Interest expense, net.    Net interest expenses increased 75.3% to €39.1 million in the fourth quarter 2001 from €22.3 million in the same period 2000. This is due to our refinancing program following the acquisition transactions. The refinancing program results in an increase of the average interest rates from 6.7% to 8.2% per annum and in a higher average debt level in the fourth quarter 2001 compared to 2000.

Year Ended December 31, 2000 Compared with Year Ended December 31, 1999

        The following table sets forth a summary of Messer Griesheim's results of operations (the predecessor) for the fiscal years ended December 31, 1999 and 2000, in terms of amounts as well as a percentage of net sales.

(1)

Amount includes research and development costs, other operating income, other operating expense, impairment of intangible assets and property, plant and equipment as well as restructuring and reorganization charges.

        Net sales.    Net sales increased 13.7% to €1,695.9 million in 2000 from €1,491.6 million in 1999. While net sales increased in all of the operating regions, the largest increases came from North America, Latin America and Asia.

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Net sales in Germany increased 4.3% to €671.7 million in 2000 from €643.8 million in 1999. This increase is principally due to increases in sales volumes. These increased sales volumes were partially offset by falling gas prices. In general, prices in the German market fell in 2000 due to increased competition in response to market conditions.



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Net sales in Western Europe (excluding Germany) increased 4.3% to €262.5 million in 2000 from €251.6 million in 1999. This increase is principally due to increased sales volumes in France, Belgium, Switzerland and Spain. Sales in the U.K. increased slightly as the favorable effects of the appreciation of the pound sterling against the euro more than offset a decline in sales volumes. Volumes in the U.K. were lower due to a decrease in the carbon dioxide bulk business and less demand for carbonated drinks. Prices in the region generally remained stable due to the stable economic conditions in western Europe. However, Messer Griesheim faced increased competition in Italy, resulting in lower prices.



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Net sales in Eastern Europe increased 11.2% to €198.1 million in 2000 from €178.2 million in 1999. This increase primarily results from increased sales volumes in almost all countries in the region. This was partially offset by lower sales in Yugoslavia resulting from a major devaluation of the Yugoslavian currency against the euro. In addition, the first time consolidation of one of the Czech subsidiaries in 2000 resulted in additional net sales of €9.6 million.



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Net sales in North America increased 28.6% to €394.3 million in 2000 from €306.7 million in 1999. This increase includes the favorable effects of the appreciation of the dollar against the euro in 2000. On a constant exchange rate basis, net sales in North America increased €38.0 million or 12.4% in 2000 compared to 1999. This increase is principally due to a growth in sales volumes in our on-site and bulk business units from sales to the U.S. steel industry, which had experienced a downturn in 1999.



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Net sales in Latin America (included in "Others") increased 79.5% to €77.8 million in 2000 from €43.4 million in 1999. This increase is principally due to growth in sales to new customers made possible by higher capacity utilization in 2000 in 19 plants that came on stream in Mexico, Brazil, Argentina, Peru and Trinidad and Tobago in 1999. These increased volumes were partially offset by a decline in prices as a result of continuing competitive price pressure in the region.



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Net sales in Asia and Africa (included in "Others") increased 34.4% to €91.4 million in 2000 from €68.0 million in 1999. The increase in net sales in Asia and Africa is principally due to sales volumes resulting from the start-up of plants in 1999 and 2000 in Singapore and China, increased sales volumes in South Africa and a significant increase in sales volumes in Indonesia, reflecting improved economic conditions.

        Cost of sales.    Cost of sales consists primarily of raw material costs, purchased parts and direct labor, as well as manufacturing overheads and depreciation. Cost of sales increased 20.5% to €844.5 million in 2000 from €700.8 million in 1999. The cost of sales as a percentage of net sales increased to 49.8% in 2000 from 47.0% in 1999. This increase is principally due to higher depreciation, resulting from a significant number of new plants in Latin America and Asia that commenced operations in 1999 and 2000. The remainder of the increase primarily results from higher energy costs in Germany and the United States that could not be passed on to customers.

        Distribution and selling costs.    Distribution and selling costs consist primarily of sales organization costs, transport of gases and cylinders from the production site or filling station to the customer, depreciation of the cylinders and tanks at the customer site, advertising and sales promotions, commissions and freight. Distribution and selling costs increased 7.1% to €568.9 million in 2000 from €531.3 million in 1999. This increase is principally due to a higher volume of production in 2000 from new plants that came on stream in 1999, primarily in Latin America and Asia. Distribution and selling costs as a percentage of net sales decreased to 33.5% in 2000 from 35.6% in 1999. The percentage improvement was primarily due to the allocation of our fixed cost base over a higher amount of total net sales.

        General and administrative costs.    General and administrative costs consist primarily of personnel costs attributable to general management, finance and human resources functions, as well as other corporate overheads. General and administrative expenses decreased 1.8% to €127.7 million in 2000 from €130.0 million in 1999. This decrease is principally due to lower staff compensation costs and operating efficiencies in Eastern Europe, resulting from the consolidation of local operations in 2000. General and administrative expenses as a percentage of net sales decreased to 7.5% in 2000 from 8.7% in 1999, as a stable level of expenses was allocated over a higher amount of total net sales.

        Other, net.    Other, net increased by €139.8 million from €17.8 million in 1999 to €157.6 million in 2000. The increase is primarily due to an increase of impairment charges (€125 million) in 2000 compared to 1999. The impairment charges in 2000 relate primarily to write-downs of filling stations in Germany and on-site plants located principally in the United States, Brazil, Singapore, Trinidad and Tobago, Mexico, Peru and Argentina. In addition, the precedessor incurred restructuring and reorganization charges of €20.4 million in 2000. These charges relate principally to payments to executives upon termination of our long-term incentive plan and severance payments to certain executives. The severance payments were made to executives associated with our Asian and Latin American operations.

        Operating (loss) profit.    Operating (loss) profit decreased to €(2.9) million in 2000 from €111.6 million in 1999. Operating loss in 2000 reflects impairment losses of €128.6 million and restructuring and reorganization charges of €20.4 million, while operating profit in 1999 reflects €3.6 million of impairment charges. Excluding these items, operating profit increased 26.7% to €146.1 million in 2000 from €115.2 million in 1999.

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Operating profit in Germany decreased 16.5% to €103.1 million in 2000 from €123.4 million in 1999. Operating profit in Germany in 2000 reflects impairment charges of €23.2 million as well as restructuring and reorganization charges of €0.5 million, while operating profit in 1999 reflects impairment charges of €3.6 million. Excluding these items, operating profit remained virtually unchanged at €126.8 million in 2000 compared to €127.0 million in 1999. Lower gross margins resulting from continued price reductions driven by the competitive environment were almost entirely offset by an improvement to our cost base, resulting from the implementation of various reorganizational measures in the second half of 2000.



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Operating profit in Western Europe (excluding Germany) increased 32.9% to €19.8 million in 2000 from €14.9 million in 1999. Operating profit in 2000 reflects restructuring and reorganization charges of €2.1 million. Excluding this item, operating profit increased 47% to €21.9 million in 2000. This increase was principally due to higher sales volumes and generally stable pricing in 2000, a change in the sales mix in France in favor of higher margin gases, the commencement of inter-regional distribution and logistics efficiency measures and lower provisions for product liabilities. This increase was partially offset by higher diesel and transport costs, particularly in France and Belgium, and a temporary shutdown of one of our larger carbon dioxide plants in the U.K.



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Operating profit in Eastern Europe increased 10.8% to €25.7 million in 2000 from €23.2 million in 1999. Operating profit in Eastern Europe in 2000 reflects impairment charges of €3.5 million and the receipt of a one-time payment of €6.2 million in connection with our Hungarian operations. Excluding these items, operating profit in Eastern Europe remained virtually unchanged at €23.0 million in 2000. This reflects an increase in net sales throughout most of the region other than Yugoslavia, partially offset by the negative effects of the devaluation of the Yugoslavian currency.



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In North America, an operating loss of €7.5 million was incurred in 2000 compared to an operating profit of €25.3 million in 1999. Operating loss in North America in 2000 reflects impairment charges of €31.6 million, as well as restructuring and reorganization charges of €7.7 million. Excluding these items, operating profit in North America was slightly higher at €31.8 million in 2000. This amount includes the negative effects of the appreciation of the dollar against the euro in 2000. On a constant exchange rate basis and excluding the impairment and restructuring charges in 2000, operating profit in North America increased in 2000. This increase was principally due to higher sales volumes partially offset by lower gross margin resulting from higher energy costs.



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Operating loss in Latin America (included in "Others") increased 97.3% to €65.9 million in 2000 from €33.4 million in 1999. Operating loss in Latin America in 2000 reflects impairment charges of €48.2 million in 2000. Excluding this item, operating loss decreased 47.3% to €17.6 million in 2000. This improvement results primarily from sales from plants that came on stream in 1999, which were partially offset by delays in the start up of certain new plants. These delays required compensating gas purchases from competitors to meet our existing contractual obligations to customers.



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Operating loss in Asia and Africa (included in "Others") increased to €17.8 million in 2000 from €5.6 million in 1999. Operating loss in Asia and Africa in 2000 reflects impairment charges of €22.1 million. Excluding this item, operating income in Asia and Africa amounted to €4.3 million in 2000. This increase is principally due to the increases in net sales in South Africa and Indonesia. This increase was partially offset by start-up problems related to Singapore Syngas Pte Ltd.

        Interest expense, net.    Net interest expenses increased 42.7% to €88.5 million in 2000 from €62.0 million in 1999. These expenses are principally the interest charges associated with Messer Griesheim's long-term debt. This increase in 2000 is due to higher long-term debt balance resulting from major investments in new on-site projects. The average interest rate was relatively unchanged.

        Income taxes.    An income tax benefit of €138.2 million was recorded in 2000, compared to an expense of €48.9 million in 1999. This is principally due to €148.5 million in deferred tax benefits. Tax loss carryforwards resulted in deferred tax benefits amounting to €122.3 million and €6.8 million for 2000 and 1999, respectively.

        Net Loss.    Net loss increased from €20.9 million in 1999 to €205.6 million in 2000. This increase is principally due to an expense of €165.3 million relating to Singapore Syngas Pte Ltd. This principally consists of €117.6 million in provisions to cover risks related to this joint venture, a €44.8 million write-down of the book value of the investment in Singapore Syngas and a €2.9 million write-down of receivables from Singapore Syngas. A further loss of €32.4 million is related to impairment charges relating to Bombay Oxygen Corp., Ltd. India.

Recent IAS Accounting Standards

        The Group has adopted each of the following standards effective January 1, 2001. Unless otherwise stated, adoption of these standards did not have a material impact on the Group's financial position or results of operations.

        In 1998 the IASB issued IAS 39 "Financial Instruments: Recognition and Measurement". The standard significantly increases the use of fair values in accounting for financial instruments and establishes specific criteria relating to hedge accounting. IAS 39 has been adopted on January 1, 2001.

        In 2000 the IASB issued IAS 40 "Investment Property". IAS 40 was effective for financial statements covering periods beginning on or after January 1, 2001. IAS 40 prescribes the accounting treatment for investment property and related disclosure requirements and replaces previous requirements in IAS 25 "Accounting for Investments". Under IAS 40, investment property is defined as property held to earn rentals or for capital appreciation or both rather than for use in the production or supply of goods or services or for administrative purposes or for sale in the ordinary course of business. The Group has opted for the cost model under which investment property is measured at depreciated cost less any impairment losses.

        In 2000 the IASB revised IAS 19 "Employee Benefits". IAS 19 (revised 2000) was effective for fiscal periods beginning on or after January 1, 2001. The standard changes the definition of plan assets and introduces recognition, measurement and disclosure requirements for reimbursements. The standard prescribes the accounting and disclosure by employers for employee benefits, post employment benefits, other long term employee benefits, termination benefits and equity compensation benefits.

Recent U.S. GAAP Accounting Pronouncements

        In June 1998, the FASB issued SFAS 133 "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 was subsequently amended by SFAS 137 "Deferral of the Effective Date of FASB 133", which allowed entities which had not adopted SFAS 133 to defer its effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000, and SFAS 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133" which addresses a limited number of issues causing implementation difficulties for entities that apply SFAS 133.

        SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts, and hedging activities. Similar to IAS 39, SFAS 133, as amended, requires the Group to recognize all derivatives in the consolidated balance sheet at fair value. The financial statement recognition of the change in fair value of a derivative depends on a number of factors, including the intended use of the derivative and the extent to which it is effective as part of a hedge transaction. SFAS 133, as amended, was adopted by the Group effective January 1, 2001.

        Although IAS 39 and SFAS 133, as amended, are similar in many respects, the transition adjustments resulting from the adoption of IAS 39 must be reported in shareholders' equity, whereas the transition adjustments resulting from adoption of SFAS 133, as amended, must be reported in earnings or other comprehensive income, as appropriate. Adoption of SFAS 133 did not have a material impact on the Group's consolidated financial statements.

        In September 2000, the FASB issued SFAS 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a replacement of FASB No. 125". This statement revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain financial statement disclosures. SFAS 140 is effective for transactions occurring after March 31, 2001, except for certain disclosure requirements which were effective December 31, 2000. Adoption of this replacement standard did not have a material effect on the Group's consolidated financial statements.

        In July 2001, the FASB issued SFAS 141 "Business Combinations", and SFAS 142 "Goodwill and Other Intangible Assets". These pronouncements significantly change the accounting for business combinations, goodwill and intangible assets. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, and also indicates that any purchase price allocable to an assembled workforce may not be accounted for separately. Additionally, SFAS 141 will require, upon adoption of SFAS 142 in its entirety, that the Group evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in SFAS 141 for recognition apart from goodwill. SFAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment annually (or more frequently if impairment indicators arise) in accordance with the provisions of SFAS 142. SFAS 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" through December 31, 2001 and SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" upon its adoption on January 1, 2002. The Group was required to adopt all provisions of SFAS 141 and certain provisions of SFAS 142 immediately. The initial adoption of these provisions did not have a material effect on the Group's consolidated financial statements. The Group is required to adopt SFAS 142 in its entirety on January 1, 2002. The Group has not yet completed its analysis of the effect of fully implementing the provisions of SFAS 142, however, management expects that adoption of these new pronouncements may have a material effect on the Group's financial statements due to the significant intangible assets, including goodwill (balance equals €598,756 and associated amortization expense totaled €20,608 during the eight month period ended December 31, 2001) and assembled workforce (balance equals €13,917 and associated amortization expense totaled €1,740 during the eight month period ended December 31, 2001) recorded in connection with the acquisition transactions described in note 3, and the reallocation of such amounts between goodwill and other intangible assets which may result from the application of SFAS 141 and SFAS 142.

        In August 2001, the FASB issued SFAS 143 "Accounting for Asset Retirement Obligations". This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 requires an enterprise to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of a tangible long-lived asset. SFAS 143 also requires the enterprise to increase the carrying amount of the related long-lived asset by the associated asset retirement costs and to depreciate that cost over the remaining useful life of the asset. The liability is changed at the end of each period to reflect the passage of time (i.e., accretion expense) and changes in the estimated future cash flows underlying the initial fair value measurement. Enterprises are required to adopt SFAS 143 for fiscal years beginning after June 15, 2002. The Group has not yet completed its analysis of the new pronouncement and has not yet determined if the adoption of the new pronouncement will have a material effect on its financial statements.

        In August 2001, the FASB approved for issuance SFAS 144. This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS 121 and the accounting and reporting provisions of APB Opinion No. 30 "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a segment of a business (as previously defined in that Opinion). This Statement also amends ARB No. 51 "Consolidated Financial Statements" to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provisions of this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, with earlier adoption encouraged. The Group has not yet completed its analysis of the new pronouncement and has not yet determined whether the adoption of the new pronouncement will have a material effect on the financial statements. However, the Group has noted that the provisions of SFAS 144 would supersede certain provisions of EITF 87-11 as they relate to allocation of purchase price in a business combination where the acquirer intends to sell a portion of the operations of the acquired enterprise (see Note 40a) and, as a result, had SFAS 144 been applied in accounting for the acquisition transactions, certain of the differences between U.S. GAAP and IAS relating to operations and entities included in the divestiture program would not have occurred.

Reconciliation of U.S. GAAP

        Our results as reported under IAS differ from our results as reconciled to U.S. GAAP, principally as a result of the different treatment under U.S. GAAP of:

•

allocation of purchase price to assets to be sold,



•

restructuring costs,



•

transaction costs incurred by our parent on our behalf,



•

impairment of long lived assets,



•

assembled workforce (intangible asset),



•

foreign currency gains and losses on borrowing costs directly attributable to construction,



•

provisions for pensions and similar obligations, and



•

gains and losses related to financial instruments.

        The significant differences between IAS and U.S. GAAP applicable to the consolidated financial statements are summarized below. Further discussion of significant differences between IAS and U.S. GAAP applicable to the consolidated financial statements are summarized in note 40 to the consolidated financial statements contained in this document.

Eight Months Ended December 31, 2001 Compared with Four Months Ended April 30, 2001

        In the eight-month period ended December 31, 2001, the net loss reported under IAS was €69.5 million and €66.6 million as reconciled to U.S. GAAP. During this period, there were reconciling adjustments of €5.5 million between IAS and U.S. GAAP relating to assets to be sold within one year of the date of the business combination. The remaining difference between net loss under IAS and net loss reported under U.S. GAAP is primarily due to the amortization impact and the tax effect under U.S. GAAP associated with these adjustments.

        In the four month period ended April 30, 2001 (prior to the acquisition transactions), the net loss reported under IAS and U.S. GAAP was €13.5 million with no significant differences.

Four Months Ended April 30, 2001 Compared with Twelve Months Ended December 31, 2000

        In the four month period ended April 30, 2001 (prior to the acquisition transactions), the net loss reported under IAS and U.S. GAAP was €13.5 million with no significant differences.

        Net loss as reported under IAS was €205.6 million in the year ended December 2000 and €179.8 million as reconciled to U.S. GAAP. There were reconciling adjustments of €27.4 million relating to impairment of property, plant and equipment. In addition, in the year ended December 31, 2000 we recognized losses, but not gains, in the fair value of derivative financial instruments as required by IAS in effect prior to January 1, 2001. Under U.S. GAAP in effect prior to January 1, 2001, both the losses and gains on those instruments were recognized. This adjustment reflects the recognition of losses of €2.5 million in the year ended December 31, 2000. The remaining difference between net loss reported under IAS and net loss reported under U.S. GAAP is primarily due to the tax effect associated with these adjustments.

Year ended December 31, 2000 and 1999

        Net loss as reported under IAS was €205.6 million in the year ended December 2000 and €179.8 million as reconciled to U.S. GAAP.

        In 1999, the net loss reported under IAS was €20.9 million and €21.3 million as reconciled to U.S. GAAP, resulting in no significant effect in net loss in 1999 as reconciled to U.S. GAAP.

        There were reconciling adjustments of €27.4 million in 2000 between IAS and U.S. GAAP relating to property, plant and equipment. These primarily included impairments recognized in accordance with IAS of €26.6 million relating to plants in Argentina and Peru, which would not be recognized under U.S. GAAP. In addition, in 2000 expenses of €2.0 million were recognized under IAS, which related to development costs incurred in 1999 for equipment in Austria, reversing the capitalization of these costs in 1999. Under U.S. GAAP, this amount was required to be expensed in 1999.

        As required by IAS in effect prior to January 1, 2001, only losses were recognised in the fair value of derivative financial instruments. Under U.S. GAAP in effect prior to January 1, 2001, both the losses and gains on those instruments were recognized. The fair value of the derivative financial instruments increased in 1999 but decreased by an almost equal amount in 2000, resulting in a €2.5 million gain for 1999 and a €2.5 million loss in 2000 under U.S. GAAP. Under IAS, no change was recognized in either year, since the 1999 gain was not permitted to be recognized, and the loss in 2000 was less than accumulated gains from previous years.

5.B LIQUIDITY AND CAPITAL RESOURCES

        The following table summarizes the cash-flow activity during the eight month period ended December 31, 2001, the four month period ended April 30, 2001 and the years ended December 31, 2000 and 1999. Consideration should be given to the effects of the acquisition transactions, the refinancing program, and the divestiture program when comparing historical financial information, including the selected financial data, for periods prior to April 30, 2001 to periods thereafter. The solid vertical line separates the information for periods prior to and subsequent to the acquisition transactions: