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Air Products Nominees Win Three Seats on Airgas Board

Sept. 15 (Bloomberg) -- 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. The company today challenged it in Delaware Chancery Court.

Airgas rose 3.6 percent to $67.16 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.”

Air Products gained $1.17, or 1.5 percent, to $81.38 as of 4:15 p.m. in New York Stock Exchange composite trading.

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.

Investors at the meeting elected Air Products’ nominees John P. Clancey, Robert L. Lumpkins, and Ted B. Miller Jr. The vote ousted McCausland as chairman, and two other directors, W. Thacher Brown, and Richard C. Ill.

Airgas shareholders voted to bar defeated directors from being reseated for three years, with the exception of McCausland, who can be reseated as long he doesn’t serve as chairman. Investors also approved an Air Products proposal to repeal any bylaw amendments adopted by the Airgas board since April 7.

Proxy Recommendations

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.

“Delaware law does not permit two ‘annual’ meetings for the election of directors in just four months,” Airgas lawyers said in a brief filed in Wilmington.

“Airgas’ lawsuit is completely without merit,” Air Products said in a separate statement.

Market Leader

Air Products is based in Allentown, Pennsylvania, about 60 miles 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.

To contact the reporter on this story: Jack Kaskey in Drexel Hill, Pennsylvania, at jkaskey@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey@bloomberg.net.

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