Making Sense of Airgas vs. Air Products

At Airgas’ September 15 annual meeting, company shareholders voted for Air Products’ three board of directors nominees, removing Airgas CEO Peter McCausland and two fellow incumbents from the nine-member board. Voters also elected to hold Airgas’ next annual meeting in January, when Air Products is expected to nominate three additional board members to run for election.

Leading up to the September 15 vote, both sides campaigned fiercely for control of the company. While the Air Products has been pursuing Airgas for almost a year, the two companies’ history dates back much further. In case you missed it, here’s are some things you should know about the two companies.

2002: A Beginning
Back in 2002, Air Products sold its U.S. packaged gas business to Airgas. Now Air Products wants it back, by way of purchasing Airgas. McGlade explains, in a letter to Airgas employees:

“You might be wondering why we are looking to return to the U.S. packaged gas business now. In 2002, our U.S. packaged gas business had limited breadth and scope and at that time, we examined our strategic priorities and decided to exit that business in order to focus on other areas where we could grow and improve our company. Over the ensuing eight years, both Air Products and Airgas have grown significantly, and as we look to the future, we see packaged gas as a growth area for Air Products.”

Was Airgas up for Sale?
In the weeks and months leading up to the September 15 annual meeting, the back-and-forth between Airgas and Air Products was lively, to say the least. On August 23, Airgas sent a letter to its shareholders stating, among many other things, “If Air Products truly wants to acquire Airgas, it knows what to do. It must offer a price that fairly compensates you—our stockholders—or terminate its efforts.” In a New York Times blog, UConn Law Professor Steven M. Davidoff brings up an important point that seems to draw on this statement: “Whether Airgas intended it, the events of this week tell the market that it certainly is for sale at the right price.”

Last week, another comment from McCausland adds fuel to this conjecture. Says McCausland, “If the January Meeting Proposal does not receive support from a majority of the votes…our Board will explore all available alternatives to the grossly inadequate Air Products offer in order to enhance stockholder value.” According to Bloomberg, “alternatives” typically involves soliciting bids from other potential buyers.

This week Air Products updated its filing with the SEC in acknowledgement of Airgas’ interest in shopping the company around: “Air Products was prepared, prior to the September 15, 2010 annual meeting, to negotiate a merger agreement with Airgas that would include a customary ‘go shop’ provision.”

An Industry Giant
Even if you do not have shares of Airgas, the potential of a merger could have serious implications for the competition in the gases and welding industry. John McGlade, in a letter to Airgas employees states, “The combined company would be the largest industrial gas company in North America and one of the largest globally.”