Airgas vote puts goal in reach for Air Products
Airgas shareholders have decided whence the hot air was blowing. By voting for three directors nominated by predator Air Products, ousting the Airgas chief executive from the board and agreeing to move up the next shareholder meeting, they rebuffed fishy incumbent claims that the firm is worth more alone.
Directors may scramble to the courts but their moral authority has been undermined. With Airgas closer to its clutches, Air Products may be able to remain firmer on its $5.5 billion hostile bid.
The Airgas board is clearly on the ropes. Down three loyalists, including founder and CEO Peter McCausland, it also lost a vote to Air Products on bringing forward the 2011 annual meeting to January. This puts Air Products within reach of overturning the staggered board — a normally formidable defense. Even if the Airgas board succeeds with efforts to convince courts the vote was not legally binding, its shareholders have spoken loud and clear. It won’t be easy now to beat back Air Products on a technicality.
The threat by Air Products to walk away rightly put a fright in shareholders. At $65.50 a share, the cash offer is now a 50 percent premium to the undisturbed price in February. Even allowing for a modest revival in the sector’s shares since then, it is hard to believe Airgas would be trading above $50 if Air Products were to abandon the bid.
The vote makes it harder to justify the Airgas board’s nearly yearlong refusal to engage in more amicable talks with Air Products. It also puts Air Products in better position to resist demands for a chunky increase to its bid. Expected synergies of $250 million are worth about $1.6 billion to shareholders, or about $19 a share. After factoring in the rise in rivals’ shares, Air Products could feasibly sweeten to $69 before it starts actively destroying value for its own shareholders. The offer already hands much of the value to its target, unless further cost cuts can be found.
The Airgas board isn’t willing to go down without a fight. But the battle may be reduced to scrapping for every last penny it can from Air Products.