When Business and Chemistry Collide

For those of you who have one foot in the business world and the other in the chemical world, you may have already heard the news on the Air Products v. Airgas case. But for those of you who haven't, let's quickly review the main points of this intrigue:

In February 2010, Air Products initiated its hostile takeover of Airgas - not the kind of hostile takeover with Vikings and lots of yelling, but a business hostile takeover. A hostile takeover in the business world is when a party makes an unwelcome purchase offer for a target company and is rejected, but just won't take "no" for an answer.

The poison pill defense

To resist Air Products' offer, Airgas used a "poison pill" defense, also known as a shareholder rights plan, which effectively attempted to dilute Air Product's shareholdings, thus making it impossible for the purchase to occur.

Air Products made its last and final offer in December for $70 per share (a total $5.8 billion bid), which was rejected shortly thereafter. In an earlier strategy, the company had effectively placed three new people on the Airgas board of directors in the hopes of swaying votes its way. Instead, the new board rejected the $70-per-share bid, stating that the bid grossly undervalued the company, and countered with a higher price ($78 per share) than Air Products was willing to pay.

Left for the judge to decide

In cases where a board of directors does not act in the shareholders' best interests (such as by rejecting a more than reasonable bid), a judge has sometimes ruled that the target company must redeem its poison pill. Thus the issue moved to the courts to determine whether the Airgas board of directors was independent and acting in the best interests of its shareholders.

Late Tuesday night, a year after this battle began, a Delaware court ruled against Air Products and did not force a redemption of Airgas's poison pill. Air Products withdrew its offer and both companies are likely to feel some fallout from unhappy shareholders. Air Products' shareholders may potentially complain about sinking millions of dollars into this case, while Airgas shareholders may begrudge the board for not accepting the bid.

For more complete details, read the New York Times' Dealbook column about this case.

Were your surprised by the judge's ruling in this case?