Decision Nears In Airgas/Air Products 'Poison Pill' Battle

Air Products Inc.'s (APD) takeover saga with Airgas Inc. (ARG), after more than a year of wrangling, will get closer to a resolution on Tuesday, with a Delaware judge poised to say whether target Airgas's corporate defenses will stand or fall.

Airgas contends Air Products's $70-per-share offer--which values Airgas at $5.9 billion--is too low, so it's justified keeping its shareholder rights plan, or "poison pill," in place. Air Products says the pill has kept shareholders from making up their own minds for too long, and is asking Vice Chancellor William Chandler to push the defense to the side.

Chandler has indicated he'll be ready to "give guidance" at the Tuesday session after a final round of arguments. That's a signal he will, if not rule outright on Tuesday, leave Airgas and Air Products no doubt about which way he's leaning.

Whichever way the judge rules, an appeal to the Delaware Supreme Court seems likely. The ultimate verdict will either reinforce the state's historic deference to boards and pills, or it will limit pills in a way that could embolden future bidders.

The Airgas board says it won't accept anything less than $78 per share. A verdict for Airgas could drive selling of its stock, which closed Monday at $63.18, as investors will have to wait for Airgas to grow into the valuation it thinks it deserves; an Air Products victory would likely propel shares toward the $70 offer price.

Airgas admits many of its shareholders would take the Air Products offer, as many are merger arbitrageurs who entered the fray after Air Products announced its intentions last February. These holders don't care that the offer is too low, Airgas contends, and simply want a speedy deal closing.

Air Products Chief Executive John McGlade says $70 is Air Products's best and final offer, and he testified that if the pill remains in place the bid is dead.

Those on Air Products's side contend a win for Airgas will put a damper on the deal scene, allowing potential suitors to be kept perpetually at bay. Conversely, Airgas backers contend an Air Products victory would eviscerate pills, giving a decided advantage to bidders willing to engage in attrition.

Airgas contends that any shareholders unhappy with the board are free to vote three of its members out at every annual meeting or even call a special interim meeting of shareholders to oust the entire board at any time.

At the close of evidence in January, the judge focused on whether Airgas shareholders can be deemed fully informed, and all sides agreed that they now are. Air Products argues that this pill has accomplished its goal of giving the Airgas board and holders time to evaluate the offer, though Airgas supporters note it has been less than two months since Air Products raised its offer to $70 a share.

-By Peg Brickley, Dow Jones Newswires; 215-462-0953; peg.brickley@dowjones.com

-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171; maxwell.murphy@dowjones.com

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