Airgas Inc. said it may buy back $700 million of its stock and could overhaul its balance sheet to purchase more should Air Products & Chemicals Inc. withdraw its $5.5 billion hostile takeover bid.
Airgas can buy 13 percent of its stock at the current price under existing loan covenants, Peter McCausland, the Radnor, Pennsylvania-based industrial-gases distributor’s chief executive officer, said today in a telephone interview. Airgas could refinance debt and tap new investors as part of a recapitalization to extend the share buybacks, he said, declining to comment on pricing.
Air Products is threatening to withdraw its bid of $65.50 a share unless Airgas shareholders on Sept. 15 elect its three director nominees and approve its proxy questions at an annual meeting. One of the questions may allow Air Products nominees to seize control of Airgas’s nine-member board in January.
“If this January meeting is turned down and Air Products walks, we will be able to come up with a good solution,” McCausland said. “What is really important is that the remaining shares that aren’t purchased trade at a good price.”
Airgas rose 19 cents to $65.02 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have increased 37 percent this year.
“In designing a recap, one of the key things we have to think about is, where will Airgas stock trade after the recap?” said McCausland, who is also the company’s founder and chairman.
Four proxy advisory firms, including Institutional Investor Services, recommended this week that shareholders oppose Air Products’ plan for a January meeting. ISS said holding director elections four months after next week’s annual meeting would impair Airgas’s ability to negotiate the best buyout price.
If the January meeting is rejected, McCausland repeated the board’s commitment to hold a shareholder meeting in June and examine “every other opportunity for creating shareholder value.”
“There would be discussions with other potential bidders and the exploration of various financial things such as recaps,” McCausland said. “We are not going to leave any stone unturned between now and June.”
About 40 percent of shares eligible to vote at next week’s meeting are held by arbitrage investors and other short-term shareholders, the CEO said. Half are long-term investors and the remainder are index funds and others, he said.
Airgas has refused to negotiate with Allentown, Pennsylvania-based Air Products, calling its offers since February “grossly inadequate.”