Germany's financial and markets regulator BaFin said it had begun a formal investigation into suspected insider trading in Linde shares in the run-up to the announcement of merger talks with U.S. rival Praxair in August.
Linde shares jumped 11 percent on Aug. 16 when the talks were announced, their biggest single-day percentage gain in almost eight years.
"We have finished our routine analysis. The second step is now a formal insider investigation," a Bafin spokeswoman said on Friday, confirming a report to be published later by German news magazine Spiegel.
She added that the investigation was into Linde share trading in general and not any particular individuals.
Linde declined to comment.
Linde's talks with Praxair to create an industrial gases market leader collapsed in mid-September but were revived in late November after the departure of the German company's two top executives.
The two companies agreed an outline for a $65 billion merger last month.
(Reporting by Georgina Prodhan; Editing by Alexander Smith)