Air Products Ups The Ante

Air Products & Chemicals has increased its offer to acquire industrial gas distributor Airgas by $3.50 to $63.50 per share. The new offer values Airgas at $7.2 billion—$5.4 billion for Airgas’ equity plus $1.8 billion in debt.

Airgas’ board of directors says it will review the revised offer and make a recommendation to shareholders. In February, Airgas rejected Air Products’ all-cash offer of $60.00 per share. It had earlier rejected two other offers that were not disclosed to the public. Airgas management maintains that all three offers undervalue the company.

Air Products, attempting to pressure Airgas management into talks, took its bid hostile on Feb. 11. It also sent out a ballot to Airgas shareholders, trying to get them to vote for Air Products-friendly directors and new Airgas bylaws when Airgas holds its annual shareholders meeting, which must take place by Sept. 17.

But few Airgas shareholders have taken Air Products’ bait. As of June 1, when Air Products had extended the deadline of the February offer, only 15,981 shares of Airgas’ 83 million outstanding shares were pledged to Air Products.

Moreover, Airgas shares have consistently traded above $60.00 since February, an indication that stock traders have been anticipating a higher bid. Shares have been trading above $63.50 since Air Products revised its offer on Thursday, July 8.

Nevertheless, Air Products CEO John E. McGlade says he is “convinced we will have widespread support from Airgas shareholders for this transaction.” The $63.50-per-share offer, Air Products points out, represents a premium of 46% over the price of Airgas shares on Feb. 4, the day before the $60.00 offer was announced.

Laurence Alexander, a stock analyst at Jefferies & Co. who has been following the takeover drama, says the new offer could break the stalemate. “Air Products’ revised offer, if not accepted, could at least serve to prompt negotiations,” he wrote to clients. He points out that the price Air Products is willing to pay relative to Airgas earnings is high compared with other recent deals in the industrial gas and chemical sectors.