UPDATE 5-Air Products bids $5.1 billion for rival Airgas

* Offer price of $60/shr represents 38 pct premium

* Deal valued at $5.1 bln, excluding $1.9 bln assumed debt

* Concerns over FTC approval

* Air Products expects to keep investment-grade rating

* Airgas up as much as 44 pct; Air Products down 8 pct (Adds link to graphic, link to Breaking Views)

By Ernest Scheyder

NEW YORK, Feb 5 (Reuters) - Air Products and Chemicals Inc (APD.N) launched an unsolicited $60-a-share cash bid for rival Airgas Inc (ARG.N), whose shares rose above that mark, indicating that investors expect a higher bid.

The $5.1 billion bid represents a 38 percent premium over Airgas's Thursday closing price. Shares have since risen as much as 44 percent to $62.63.

The jump of Airgas shares above the $60 mark indicated Airgas shareholders view the current offer as too low, and may prompt a higher proposal -- which Air Products said it was willing to consider if Airgas shows "additional value" -- or a bid from a rival.

Airgas said its board would review the proposal and advised its shareholders to take no action. A representative was not immediately available for comment.

The Airgas board already rejected two similar proposals. The first bid was all stock, while the second included stock and cash.

Air Products said the deal would be financed through a one-year bridge loan from JPMorgan Chase & Co (JPM.N) and that it is willing to sell assets to assuage regulatory concerns.

David Balto, a former Federal Trade Commission policy director, said the deal likely would receive "very intense scrutiny" and that regulatory agencies have recently become more aggressive with antitrust enforcement.

"These are naturally local markets and typically they're going to require a lot of divestitures," he told Reuters. "The key here is that the agencies are changing the thresholds of concern."

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Please see: Market share of the biggest industrial gas players: link.reuters.com/hyc97h

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BETTER BUYERS?

One analyst said Air Products did not appear to be the logical buyer for Airgas, which could be a more strategic partner for a European company.

"We believe the two European players, Air Liquide (AIRP.PA) and Linde (LING.DE) are more logical buyers. This is because buying Airgas would provide them with a much stronger U.S. presence," Soleil Securities analyst Mark Gulley said in a note to investors.

For BreakingViews column, please see: [ID:nN05221624]

Allentown, Pennsylvania-based Air Products already has a large presence in Europe and with Airgas's assets would immediately gain dominance in the North American gas market and have a key connection to the manufacturing sector.

The deal would be an immediate boost to its earnings and yield cost savings of $250 million, Air Products said.

The deal would include $1.9 billion of assumed debt.

Air Products financial adviser for the deal is JPMorgan Securities and its legal advisers are Cravath, Swaine & Moore and Arnold & Porter.

SALES NETWORK SOUGHT

Air Products, which supplies gases such as argon, helium and nitrogen to customers in the metals, chemical and pharmaceuticals sectors, wants Radnor, Pennsylvania-based Airgas for its large sales and distribution network and 1,500 sales representatives.

Airgas sells canisters of specialty gases to industrial and medical facilities, and ironically buys much of its gas from Air Products.

Airgas has long had a policy of growth through acquisitions, and has bought more than 350 smaller rivals over the years to significantly boost its U.S. market share.

McGlade said he was "deeply disappointed" the Airgas board rejected earlier proposals and said his company is prepared to launch a tender offer directly to Airgas shareholders.

"Your unwillingness to engage has delayed the ability of your shareholders to receive a substantial premium," McGlade said in a letter to McCausland. (Reporting by Ernest Scheyder and Matt Daily in New York. Additional reporting by Diane Bartz in Washington, D.C., and Sakthi Prasad in Bangalore; Editing by Hans Peters and Derek Caney)