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Acquisitive Air Products May Face Hostile Acquisition of its Own

Air Products and Chemicals, Inc., which sells gases and chemicals for industrial uses, has a reputation for attempting hostile acquisitions of other companies, most recently, Pennsylvania-based Airgas, Inc. Now it appears that Air Products could itself be facing an unwelcome takeover bid -- from Pershing Square Capital Management, which has already acquired a 9.8-percent stake in the company.

For now, discussions between the companies aren’t particularly hostile. As Pershing disclosed in its “plans and proposals” for Air Products, as described in Schedule 13D, Item 4 of the investment Pershing filed last week, it apparently plans to “engage in discussions with management, the board of directors, other stockholders and other persons that may relate to governance and board composition, management, operations, business, assets, capitalization, financial condition, strategic plans and the future of the Issuer.”

Air Products responded with the statement that it “welcomes new investors and looks forward to engaging with Pershing Square to understand its views.” At the same time, it announced that it had adopted a “poison pill” provision, which puts a barrier in the way of any activist investor who should acquire 10 percent of Air Products stock.

Pershing’s interest in buying more than that 10 percent will depend largely on how these friendlier talks proceed. So far, the maneuver has convinced that the proxy battle it will face if it reaches the 10-percent threshold isn’t worth the trouble, but the capital management group will be sizing up the pros and cons in these initial meetings with Air Products management. Pershing has not hesitated move forward to the proxy fight in other acquisitions.

One irony pointed out by a columnist for the New York Times’ DealBook blog, is that Air Products’ 2011 bid for Airgas was also stopped by a poison pill -- and Air Products urged Airgas to allow its shareholders to decide the issue. When Airgas refused, Air Products sued and was forced to back down. Now Air Products’ words may come back to haunt the company.

Source: The New York Times’ DealBook blog, “Air Products Faces Modern Form of Hostile Takeover,” Steven M. Davidoff, July 31, 2013

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