Airgas Plays M&A Poker (ARG, APD)

Airgas, Inc. (NYSE: ARG) has announced that its board of directors has voted unanimously against recommending the unsolicited buyout offer from Air Products & Chemicals, Inc. (NYSE: APD).  The deal rejected is the most recent $60.00 per share in cash, via an unsolicited tender offer.  The board is recommending that Airgas shareholders do not tender their shares to Air Products.  The company said that Air Products’ offer significantly undervalues Airgas and the offer does not reflect the value of Airgas’ future prospects.  Also noted was that this is the largest and most valuable packaged gas business in the world that can deliver greater value than this offer.

The company also called this opportunistic as Air Products is trying to obtain the future value of Airgas at a bargain basement price and that this point of the business cycle is the wrong time to sell the company.  Airgas has further noted that believes the offer is highly likely to be “subject to substantial delays related to U.S. antitrust clearance” and that a failure to commit to make the necessary divestitures and a failure to obtain antitrust clearance heighten the concern over regulatory risk and delay.

Further noted was that the numerous conditions of the offer create significant uncertainty and risk as to whether the offer can be completed and the timing for completion.   The company even goes on to allege that Air Products’ acquisition of Airgas will likely reduce value and that Air Products has a poor acquisition track record, little experience relevant to Airgas’ business and more.

In short, Airgas is not just vying for a slightly higher offer.  The company is either going to demand a much higher price or risk a go-it-alone strategy.  In driving they call this a game of chicken.  In M&A, it is more like poker.

JON C. OGG
FEBRUARY 19, 2010