Airgas, Inc. has announced that it unanimously rejected Air Products’ revised tender offer after receiving financial and legal advice. This follows Air Products’ offer to acquire all outstanding common shares of Airgas for $65.50 per share, a price that Peter McCausland, Airgas Chairman and CEO, feels “grossly undervalues Airgas.”
McCausland also said that Air Products’ offer of $2.00 more per share over its previous offer “does not adequately compensate Airgas stockholders for the Company’s inherent value, excellent prospects and impressive economic performance since Air Products first announced its offer.”
The Airgas Board of Directors recommended that Airgas stockholders not tender their shares into Air Products’ new offer, and also urged them to vote against Air Products’ By-Law amendment proposals at the Annual Meeting of Stockholders for Airgas scheduled for September 15.
On September 8, Airgas sent the following letter to Airgas stockholders:
Dear Airgas Stockholder:
The Airgas Board of Directors has unanimously rejected the revised Air Products offer to purchase Airgas common stock at $65.50 per share in cash. In our Board’s judgment, the new Air Products offer – which represented only a $2.00 per share price increase and was below the Airgas closing stock price on the last trading day before the announcement of the revised offer – is grossly inadequate and does not represent an appropriate value for your Airgas shares. We believe this offer is yet another opportunistic attempt to cut off the Airgas stockholders’ ability to benefit as the domestic economy continues its recovery. We urge you NOT to tender your shares into the revised Air Products tender offer.
$65.50 per share – a mere 3% increase – is not an appropriate price. We believe that this slight increase in Air Products’ offer price does not compensate Airgas stockholders for the Company’s scarcity and synergy value, our extraordinary history of providing superior returns for our stockholders, our impressive economic performance since the first Air Products offer and our excellent prospects. Our record of past and current accomplishments, and our record of emerging strongly from prior recessions, support our belief in the achievability of our growth prospects. Our SAP implementation, the costs of which were effectively paid for by Airgas stockholders and which have been included in our earnings per share estimate of $4.20+ for calendar 2012, also creates significant stockholder value.
Further, acquiring Airgas would create enormous financial benefits for Air Products. Based on Air Products’ own statement, at $65.50 per share, the acquisition is expected to be immediately accretive to Air Products’ earnings per share on both a GAAP and cash basis, excluding one-time costs. As described in the attached Schedule 14D-9, we believe the synergy benefits of $250 million that Air Products has announced would be worth over $20 per Airgas share.
In addition, we believe that the $5.50 per share increase of the latest Air Products offer as compared to its February offer – a 9.2% increase over the initial $60 per share price – should be viewed in the context of developments in the industrial gas industry in the seven months since Air Products announced the initial offer. Since that time, the average percentage share price appreciation of the three major industrial gas companies, excluding Air Products and Airgas, was approximately 18.3%. Similarly, since the date of the initial offer, the relevant sector trading multiples have substantially expanded. Indeed, as shown in the attached Schedule 14D-9, the latest interim results of industrial gas companies all demonstrate strong performance. We believe this reflects an industry-wide trend and underscores the inadequacy of the Air Products offer.
For these reasons, as well as the others described in the attached Schedule 14D-9, our Board believes strongly that the Air Products offer should be rejected.
Share repurchases and other transactions. Air Products’ most recent tactic to deprive our stockholders of value – its threat to terminate its efforts to buy Airgas if Airgas stockholders do not elect all of its nominees and approve all of its By-Law proposals at our upcoming Annual Meeting – is consistent with Air Products’ approach throughout the past 10 months. These tactics have included the low-ball pricing of its offers for Airgas; the public relations effort to justify that pricing and to “talk down” Airgas’ performance and its prospects; the constant attacks impugning the Airgas Board and its response to the inadequate offers from Air Products; and the effort, through its proxy solicitation, to cut off Airgas stockholders’ ability to benefit from Airgas’ very strong performance. Instead of offering an appropriate value, Air Products has offered a small price increase, coupled with what it hopes will be regarded as a large threat.
We believe that the strategic importance of Airgas to Air Products and the financial attractiveness of the transaction to Air Products make it unlikely that Air Products will terminate its offer if each of its conditions is not met. Accordingly, we urge Airgas stockholders not to be swayed by Air Product’s cynical and coercive tactics. However, as we describe in the attached Schedule 14D-9, if Air Products does carry out its threat to terminate its efforts to acquire Airgas, Airgas intends, through repurchases or other transactions, to assist its stockholders who desire to sell their shares in the near term.
Our Board has committed to call a June 2011 Special Meeting. Our Board believes that Air Products is seeking, through its three nominees to the Airgas Board of Directors and its By-Law proposals – in particular its January Meeting Proposal – to divert from our stockholders to Air Products the value Airgas stockholders would realize if Airgas continues on its current course. Airgas and its directors have already made a binding commitment to call a Special Meeting of Stockholders on June 21, 2011, if Air Products’ January Meeting Proposal does not receive support from a majority of the votes represented and entitled to vote at the September 2010 Annual Meeting. This Special Meeting would give stockholders the ability to vote for a number of individuals so that, if a plurality of Airgas stockholders vote for these nominees, these nominees, together with any Air Products nominees elected at the September 2010 Annual Meeting, would constitute a majority of the Airgas Board. In short, by means of the June Special Meeting, we are seeking to satisfy our stockholders’ and our Board’s desire that the Board be held accountable for the Company’s performance and its response to the Air Products offers.
Our additional commitment to explore alternatives to enhance stockholder value. We believe that the ability to add two additional quarters of performance to the Company’s record will significantly enhance our value as the Board responds to Air Products and proactively explores ways to enhance stockholder value. As a result, Airgas and its directors now make an additional commitment to our stockholders: if the January Meeting Proposal does not receive support from a majority of the votes represented and entitled to vote at the September 2010 Annual Meeting, prior to the June 2011 Special Meeting, our Board will explore all available alternatives to the grossly inadequate Air Products offer in order to enhance stockholder value.
In this regard, the Airgas Board has made clear on numerous occasions its willingness to engage in negotiations that it believed would result in an appropriate value for Airgas stockholders. We would be willing to commence negotiations with Air Products or any other party if we believed an appropriate value would result. However, the latest Air Products offer of $65.50 per share is not an appropriate value or a sensible starting point for negotiations to achieve such a value.
Consider who is best aligned with your interests. As you evaluate Air Products’ actions and its tender offer, we ask you to remember that it is in Air Products’ economic interest to acquire your company at the cheapest possible price. In contrast, the members of the Airgas Board of Directors are fellow Airgas stockholders who, in addition to having fiduciary duties to you as directors, have substantial investments in Airgas. The current Airgas directors, including our Chairman and Chief Executive Officer, Peter McCausland, own a total of approximately 11% of the Airgas shares (including options). We believe this stake firmly links the Board’s economic interests with those of our stockholders.
We appreciate your continued support.
On behalf of the Board of Directors,
Peter McCausland
Chairman and Chief Executive Officer
