Judge To Rule Soon In Air Products/Airgas Poison Pill Battle

A Delaware judge on Tuesday didn't issue a ruling on the challenge against Airgas Inc.'s (ARG) takeover defenses by hostile suitor Air Products & Chemicals Inc. (APD), but said he would work to deliver a written decision "quickly."

Now both parties will wait while Vice Chancellor William Chandler contemplates the "superb" arguments he said were presented by both sides. The takeover battle has raged for over a year, and Air Products is asking the court to pull Airgas's shareholder rights plan, or "poison pill," defense so Air Products can take its $70-a-share cash tender offer to the Airgas shareholders.

Chandler had said he hoped to provide "guidance", if not a verdict, that would let both parties know where they stood when closing arguments finished on Tuesday. Instead, he praised the attorneys and promised to work hard to get them a decision as soon as possible, intimating he'll rule within days.

The loser will likely appeal the ruling to the Delaware Supreme Court, which has already overturned a previous Chandler ruling in favor of Air Products in a separate legal action between the two parties, meaning the ultimate fate of the Air Products tender offer could still be some time off.

Air Products has said the tender offer would die with a verdict against it and it would end its efforts to acquire its smaller rival.

Broadly, the trial seeks to determine when, if ever, a poison pill should be pulled because its purpose has been served, or it simply has existed for too long, and whether boards of directors have ultimate power to protect shareholders from themselves.

Airgas argued its board is independent, better informed than its investors and bound by fiduciary duty to reject inadequate offers. The position of the Airgas board is that $70 is too low and $78 is a minimum valuation for the company is based on--and justified by--three investment banks it retained and several Wall Street analysts who follow its stock, it said.

Air Products hopes to persuade the judge that poison pills, almost universally upheld in Delaware courts since their introduction in the 1980s, serve short-term purposes, namely to defend boards and shareholders from rapid, coercive takeovers. Delaware law isn't designed to protect shareholders from themselves, Air Products attorneys argued, nor should it be.

"Whatever valid purpose the Airgas defensive measures may have served, that purpose has been extinguished," said Kenneth Nachbar, of Morris Nichols Arsht & Tunnell, in his closing argument on behalf of client Air Products. "The company's defenses are no longer needed and are no longer proportionate," he said.

Airgas argued there is no mandated expiration date for poison pills under Delaware law.

Marc Wolinsky of Wachtell said in his closing argument that an inadequate offer does represent coercion and a threat, and the poison pill also serves as a negotiating tool in case Air Products's "best and final" offer isn't exactly that.

Chancellor Chandler asked Wolinsky if there is ever a case where a board must defer to shareholders, assuming the board is fully informed, independent and acting in good faith, and shareholders were also fully informed, as well as sophisticated investors. Wolinsky argued that Delaware law says the board always gets to make the final call.

Airgas supporters contend a verdict for Air Products eviscerates poison pills and emboldens corporate raiders. Air Products attorney Nachbar said a decision against his client makes companies like Airgas, whose directors don't all stand for re-election annually, in essence takeover-proof.

Airgas says its holders can call a special meeting at any time to remove the entire board, a protection not offered at most companies with such so-called staggered boards.

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

(Peg Brickley contributed to this article.)

Air Products and Chemicals (NYSE:APD)
Historical Stock Chart
From Jun 2024 to Jul 2024