Investors should buy bullish Airgas Inc. options because Air Products & Chemicals Inc. will probably raise its $65.50-a-share bid to buy the producer of industrial gases to $71 or $72, MKM Partners LP said.
Options strategist Jim Strugger and event-driven strategist Keith Moore recommended buying December $65 calls while selling December $67.50 calls, a strategy known as a call spread that caps potential profit while reducing the cost of the trade. Radnor, Pennsylvania-based Airgas rose 0.6 percent to $65.50 yesterday.
Air Products, the second-biggest U.S. industrial-gases producer, sued on Feb. 4 to force consideration of the bid. Shareholders in September elected three nominees of Allentown, Pennsylvania-based Air Products to Airgas’s staggered board and voted to move up the next meeting to January. The Delaware Supreme Court last month invalidated the January meeting, saying it improperly shortened directors’ terms.
“The next meaningful event in this takeover saga should occur sometime over the next three days when both companies are expected to respond to questions posed by the judge,” Strugger and Moore wrote in a report today. “We believe that APD will finally raise its bid to a competitive level.”
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