Air Products opens court fight in Airgas deal bid

* Trial to help determine outcome of hostile $5.5 bln bid

* Air Products takes aim at Airgas anti-takeover defenses

* Air Products CFO and CEO will be first to take stand

* Courtroom sealed as trial begins

By Tom Hals

GEORGETOWN, Del., Oct 4 (Reuters) - Air Products & Chemicals Inc (APD.N) took its $5.5 billion hostile bid for smaller rival Airgas Inc (ARG.N) to court on Monday, arguing that the takeover target was ignoring the will of its shareholders by refusing to negotiate.

The companies have filed lawsuits against each other, and a third lawsuit brought by Airgas shareholders against the company's board also is being heard in a week-long trial.

Almost as soon as the trial began, judge William Chandler sealed the courtroom as requested by Air Products' lawyer, Thomas Rafferty, of the law firm Cravath, Swaine & Moore.

The move cut off a live video stream of the trial and forced into the hallway a crowd of lawyers who were not part of the immediate litigation teams, as well as analysts and journalists.

Rafferty made the request as he started questioning the first witness, Air Products' Chief Financial Officer Paul Huck, about the logic for combining the two companies.

Huck told a packed room in Delaware Chancery court, which included the top executives of both companies, that Air Products began looking at Airgas as it was examining ways to expand its North American businesses and strengthen its reach with clients in pharmaceutical businesses.

"We also looked at combining the two companies and the value that could be represented by cost savings," Huck said before the courtroom was sealed.

At stake is a leading position in North America for industrial gases such as argon, helium and nitrogen, which are used in hospitals, welding and refrigeration.

The combined company would twin Air Products' gas supplies with Airgas' sales force, giving it more of an ability to raise prices while cutting costs.

The case also will highlight common anti-takeover tactics, including poison pill provisions and staggered board elections, and whether they are valid.

Allentown, Pennsylvania-based Air Products and Airgas of Radnor, Pennsylvania are fighting in Delaware, where they are incorporated. The state's corporate law governs about half of America's largest companies and the Court of Chancery has settled numerous high-profile corporate disputes.

Air Products is expected to argue that Airgas' poison pill defense is not a fair response to its takeover proposals. It will also contend that it has tried to negotiate and that Airgas has ignored the will of its own shareholders.

Airgas' lawsuit focuses on changes to its corporate bylaws that were approved at a shareholder meeting last month. The changes brought forward the next annual meeting to January, when shareholders who support Air Products are expected to vote in three new directors, giving the larger company de facto control.

Airgas is expected to present its case later in the week. It has argued that the annual meeting should not be held twice in the same fiscal year, which ends in March, and that the bylaw change was not approved because it was supported by a majority of less than two-thirds.

The three cases are: Air Products & Chemicals Inc v Airgas Inc, No. 5249; Hollywood Police Officers Retirement System v Airgas Inc, No. 5256; and Airgas Inc et al v Air Products & Chemicals Inc, No. 5817, Delaware Chancery Court. (Reporting by Tom Hals, editing by Martha Graybow and Robert MacMillan)