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Upping The Ante

Mergers and Acquisitions: Air Products hopes better offer will entice Airgas shareholders

by Alexander H. Tullo
July 13, 2010

Credit: Air Products
The welding industry is a big customer for both Airgas and Air Products.
Credit: Air Products
The welding industry is a big customer for both Airgas and Air Products.

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 $7.3 billion--$5.4 billion for Airgas' equity plus $1.9 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 earlier rejected two other offers-one for $60.00 per share in stock and one for $62.00 per share in stock and cash-that weren't disclosed to the public before the February bid. Airgas management claims all the 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 proxy 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 pledged their shares to Air Products. Moreover, Airgas shares consistently traded above $60.00 since Air Product's February offer, indicating that stock traders expected a higher offer. They have been trading above $63.50 per share since Air Products revised its offer last Thursday.

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-per-share offer was announced.

Though he would like to get Airgas' management to the negotiation table, McGlade also indicates that there isn't much room for a better offer. "I want to be very clear to the shareholders of both companies that we will remain disciplined on price," he says in a statement.



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