DREXEL HILL, Pennsylvania (Reuters) - Airgas Inc suffered a blow to its efforts to stave off a takeover by rival industrial gas supplier Air Products and Chemicals Inc on Wednesday, when its shareholders ousted three board members, including its chief executive.
Shareholders also approved changes to three bylaws, including one that would bring forward a shareholder meeting to January to elect more board members.
Airgas said that two of the amended bylaws, including the one to advance the shareholder meeting, were invalid because they failed to win the support of two-thirds of shareholders. Airgas said it plans to challenge the results in court.
Air Products (APD.N) has proposed $65.50 per share for Airgas ARG.N, or about $5.5 billion.
After the vote John McGlade, Air Products’ chief executive, said he was “ready to negotiate immediately.”
“Airgas shareholders have provided a clear mandate to negotiate a transaction,” he said.
Chief Executive and now-former Chairman Peter McCausland, who founded Airgas 28 years ago, had presented a wide-ranging argument for staying independent during the meeting, but was not available for comment after the vote.
“We have a clearly documented history of solid growth in periods of economic recovery,” McCausland told shareholders. “We’re close to our peak earnings that we achieved in 2008.”
While he made his presentation, Air Products executives, as well as those supporting their bid, left to huddle in the parking lot outside the meeting, held in a Philadelphia suburb. Voting ended just as McCausland finished his presentation, and it appeared McCausland knew of the outcome even as he spoke.
“For someone who founded the company, you would have thought that McCausland would have been more emotional,” said Morningstar analyst Basili Alukos. “He must have already known that he wasn’t going to win.”
Indeed, copies of an Airgas press release announcing that Air Products’ nominees and proposals had won appeared at the meeting even before voting was officially complete. Airgas representatives said they did not know where the press release came from.
For many though, Wednesday’s news resolved little of the buyout battle, which has been ongoing since Air Products first privately approached Airgas last winter.
“Basically, nothing got solved today,” said Monness, Crespi, Hardt & Co analyst Chris Shaw. “It looks like Airgas is still going to fight, but a possible resolution may be sometime in the future.”
Taking the place of the ousted Airgas directors are John Clancey, chairman emeritus of shipping company Maersk; Robert Lumpkins, board chairman of fertilizer producer Mosaic (MOS.N), and Ted Miller, former chief executive of wireless communications tower provider Crown Castle International Corp (CCI.N).
It was not immediately clear who would become chairman of the Airgas board.
A majority of shares voted at the meeting supported the three bylaw proposals, including one to hold the next Airgas meeting in January 2011.
The logic of the move is that Air Product would obtain de facto control of the company if a yet-to-be-named slate of three more nominees were elected at the January meeting to the nine-member Airgas board.
Airgas said that because less than 67 percent of all outstanding shares did not vote to support the bylaw proposals, it does not believe they passed under Delaware law.
Airgas, which previously voiced opposition to the bylaw proposals, said it would “seek an expedited judicial determination on the validity of this bylaw.”
Also Wednesday, Airgas shareholders voided all bylaw amendments instituted by the Airgas board since April and passed a bylaw prohibiting any Airgas director that loses his or her seat from rejoining the board within three years. The latter proposal exempted McCausland.
Airgas has consistently said the $5.5 billion offer by Air Products is too low, though it is roughly a 50 percent premium to Airgas’ stock price before the bid was announced.
At stake is command of the North American industrial gas market, which supplies oxygen, argon and other gases used in construction, healthcare and dozens of other industries.
Meanwhile, an Air Products lawsuit against Airgas is slated to start next month in a Delaware courtroom. The lawsuit was filed months ago, but a judge waited to proceed until after the Airgas shareholder meeting.
Airgas shares rose 3.8 percent to $67.31 in afternoon trading, while Air Products shares rose 1.8 percent to $81.16.
Reporting by Ernest Scheyder; Editing by Robert MacMillan, Steve Orlofsky and Bernard Orr