Airgas Inc. shareholders threw their support behind Air Products & Chemicals Inc.’s proposed $5.5 billion hostile takeover by voting for all three of the bidder’s director nominees and proxy questions.
More than half the votes cast at Airgas’s annual meeting in Drexel Hill, Pennsylvania, today supported holding another meeting on Jan. 18, giving Air Products nominees a chance to take control of the board in four months. Airgas Chief Executive Officer Peter McCausland said in an interview that the meeting proposal isn’t valid and will be challenged in court.
Airgas rose as much as 3.7 percent to $67.25 in New York trading, suggesting investors are betting there will be an offer higher than Air Products’ $65.50 bid. Air Products raised the offer from $63.50 last week and said it would end its pursuit of Airgas unless investors voted for its proposals at the meeting.
“Looks like Airgas has no choice now but negotiating a friendly deal,” said Lionel Melka, an arbitrage investor in Paris at Bernheim Dreyfus & Co. who manages assets including Airgas shares. He said he expects a friendly deal at $70 or $72 a share. “The ‘just say no’ defense is no longer viable.”
Airgas increased $2.26, or 3.5 percent, to $67.11 as of 12:05 p.m. in New York Stock Exchange composite trading. Air Products dropped 21 cents, or 0.2 percent, to $80.
The final results of the vote will be released after being tabulated and certified, Airgas said in a statement.
‘Ready to Negotiate’
“Airgas shareholders have provided a clear mandate to negotiate a transaction,” Air Products CEO John McGlade said in a statement. “We stand ready to negotiate immediately.”
McGlade, who runs the world’s biggest hydrogen producer, took a $60-a-share bid directly to shareholders in February after two prior requests for friendly talks were rejected.
“It’s now a question of the two parties sitting down and negotiating a friendly deal,” said Mark Gulley, a New York based analyst at Soleil Securities.
Four proxy advisory firms, including Institutional Investor Services, recommended last week that Airgas shareholders oppose Air Products’ proposal to hold the next annual meeting in January. ISS said the threat of a board takeover would deprive Airgas of the ability to negotiate the best price.
Airgas said Aug. 23 that the accelerated annual meeting schedule was legally invalid, partly because it may improperly shorten directors’ terms. Airgas also will challenge the January meeting in court because it didn’t win the support of half of all shares outstanding and didn’t meet a Delaware requirement for a two-thirds majority, McCausland said today.
Air Products is based in Allentown, Pennsylvania, about 60 miles (100 kilometers) north of Airgas’s headquarters. A combination of the companies would have more than $12 billion in sales, replacing U.S. market leader Praxair Inc. and closing the gap with Air Liquide SA of France and Germany’s Linde AG.
McCausland created Airgas in 1982 with his first purchase of a packaged gas company for $5.3 million. Radnor, Pennsylvania-based Airgas made more than 400 acquisitions, grabbing 25 percent of the market for industrial gases such as argon and oxygen sold in small quantities.
Should Air Products end its pursuit, Airgas may institute a share buyback to support the share price and recapitalize the balance sheet, McCausland said last week. The company also would talk with other potential bidders, he said.
McCausland owns 9.2 percent of the company’s shares.