Airgas Would Have Weighed $70-Per-Share Bid, CEO Says

Airgas Inc.’s chief executive officer testified that he would have considered a $5.9 billion buyout bid from Air Products & Chemicals Inc. last month after shareholders voted to knock three incumbent directors off the gas company’s board.

Airgas’ CEO Peter McCausland said one of his company’s bankers was approached by an Air Products lawyer after the Sept. 15 vote and said the maker of industrial gasses might be ready to pay as much as $69 per share for its smaller rival. Airgas has rebuffed Air Products’ $5.5 billion purchase offer.

If “Air Products made a $70 bid and did the things I wanted, I’d recommend” Airgas’ board begin negotiations, McCausland testified in the trial of Air Products’ lawsuit over Airgas’ refusal to accept its bid. At $70 per share, the offer would have been worth $5.9 billion as of Sept. 15.

Air Products, the second-biggest U.S. industrial-gases producer behind Praxair Inc., sued Radnor, Pennsylvania-based Airgas on Feb. 4 to force consideration of the bid. Air Products is based in Allentown, Pennsylvania.

As part of the case, Airgas is asking Chandler to invalidate a bylaw approved Sept. 15 by shareholders that added three Air Products nominees to the Airgas board. The bylaw would also move Airgas’s annual meeting to January from April at the earliest.

Moving up the annual meeting will unfairly allow Air Products to try to knock more Airgas nominees off the board and take control, according to Airgas executives. Chandler has agreed to decide both issues in the nonjury trial.

Chairman Ousted

McCausland, who was chairman of Airgas’s board, was ousted from the panel along with two other colleagues in the Sept. 15 vote.

After the votes were tallied, the CEO was thanking colleagues for their service when he got word that Air Products had informally raised its offer, McCausland recalled.

He said Michael Carr, a Goldman Sachs Group Inc. banker who advises Airgas, told him Jim Woolery, an Air Products’ lawyer, told him the second-biggest U.S. industrial-gases producer behind Praxair Inc. would be willing to pay “$68 or $69 per share” for Airgas. That was an increase of at least $2.50 a share for the gas company.

McCausland said he sent back the message through Carr that he’d be willing to start negotiations at $70 so long as they made the bid public and were willing to pay more if Airgas could show the company was worth a higher price, the executive testified. Air Products officials replied they might be willing to pay $70, but no more, the CEO added.

Chief ‘Blew It’

Air Products officials later sent word back that McCausland “blew it” by not immediately accepting the $70 offer, the CEO testified.

Prior to the meeting, Air Products officials had said “to never expect to get anything with a 7 on it” in connection with a per-share offer, McCausland recalled.

The current offer “grossly undervalues” Airgas given the strength of its business, McCausland added.

“I understand they want this company, but they aren’t willing to pay fair and full value,” Airgas’ CEO said about Air Products’ executives.

The case is Air Products & Chemicals Inc. v. Airgas Inc., 5249, Delaware Chancery Court (Wilmington).

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