The Rising Influence of Rising Affluence

[DewDiligence]

APD Raises Hostile Offer for ARG to $63.50/sh

[Investors had clearly expected APD to raise its bid insofar as ARG was trading near the $63.50 price of the raised offer before APD made the increase public today. (It was not hard for investors to ascertain that APD would likely raise its offer because APD offered $62 in a “friendly” deal in Oct 2009 before retracting that offer and substituting the $60 hostile offer in Feb 2010.)

I’m bullish on APD because: i) it’s a major beneficiary of The Global Demographic Tailwind—please see #msg-46518659 and #msg-48562255 for details; ii) business is strong, causing APD to raise guidance two months ago (#msg-49567403); and iii) the valuation is modest and the stock pays a 3% dividend yield. However, I’m neutral on APD’s offer for ARG; although the deal will create some obvious synergies, I don’t think ARG’s “merchant gas” business (filling small orders of bottled gasses for a large number of diverse US customers) is compelling enough to warrant paying a big premium to ARG’s market price before APD made its original offer.]

http://online.wsj.com/article/SB10001424052748704111704575355403341949116.html

›JULY 9, 2010
By GINA CHON

Air Products & Chemicals Inc. said Thursday it is raising its all-cash hostile bid for Airgas Inc. to $63.50 a share, or about $5.3 billion, from $60 a share.

The new offer represents a 46% premium to Airgas's share price the day before Air Products made its $60-a-share bid public on Feb. 4. That bid came after Airgas rejected a friendly proposal of $62 a share in cash and stock that Air Products made in October.

The two companies are rivals in the business of distributing industrial, medical and specialty gases and related equipment. Air Products, with a market value of $14.6 billion is far larger than Airgas, with has a market value of about $5.3 billion.

Airgas shares closed Thursday at $63.87, up 37 cents, in 4 p.m. composite trading on the New York Stock Exchange.

Air Products' $60 offer was set to expire on Aug. 13, but Airgas set a July 19 record date for shareholders to be eligible to vote on the bid. That spurred Air Products to make a higher bid, people familiar with the matter said. Airgas hasn't set a date yet for a shareholders vote on the bid, but has said it expects to hold a meeting by Sept. 17.

"With this price increase, and the record date now set, we are convinced we will have widespread support from Airgas shareholders for this transaction and for our board nominees and proposals," said John McGlade, chairman of Air Products, in a statement.

Airgas said Thursday its board would review the new offer, and advised shareholders to take no action for now. Airgas's board and its founder, Peter McCausland, had rejected the $60-a-share bid proposal, saying it "grossly undervalues" Airgas.

Earlier this year, Air Products proposed three nominees for Airgas board of directors as part of its hostile bid, including Robert Lumpkins, a former vice chairman of Cargill Inc.

Air Products made several other proposals, including an amendment that would require Airgas to hold its 2011 annual meeting on Jan. 18, in hopes that Airgas shareholders will have replaced a majority of the company's board by then. An early 2011 meeting could also discourage Airgas from any move to create a board of directors with staggered terms. Staggered terms would make it harder for Air Products to install its own board members at Airgas.‹