Air Products & Chemicals, Inc. v. Airgas, Inc.

In a case with a wide-ranging impact, the Delaware Chancery Court upheld Airgas Inc.'s shareholder rights plan and concluded that the company's defensive measures were reasonable given the threat of a hostile bid offer by Air Products & Chemicals. The court's ruling reaffirmed the use of the so-called poison pill that companies have used to prevent hostile takeovers.

Wachtell, Lipton, Rosen & Katz, counsel for Airgas, retained Analysis Group to provide economic analysis related to the value of Airgas and to assess the economic reasonableness of the response of Airgas's board to the various bids made by Air Products. In its suit against Airgas, Air Products argued that Airgas should not be allowed to continue using a poison pill to reject its hostile bid of more than $5.8 billion. The suit raised important issues related to the balance of power between corporate directors and shareholders. The chancellor's ruling, referred to as a "landmark decision" by The Wall Street Journal, reinforced the purview of the board, stating that the "power to defeat an inadequate hostile tender offer ultimately lies with the board of directors."

The Analysis Group team, led by Co-Founder Bruce Stangle, and Managing Principals Maureen Chakraborty and Gaurav Jetley, supported our academic affiliate, R. Glenn Hubbard, dean emeritus of Columbia Business School, who provided expert testimony and filed an expert report. Dr. Hubbard's testimony was singled out in the chancellor's ruling: "[Professor] Hubbard, on the other hand, testified that Airgas's macroeconomic assumptions were reasonable, and convincingly and persuasively explained why. Ultimately, I found Professor Hubbard to be the most persuasive expert witness on valuation … "

In its coverage of the ruling, The Wall Street Journal noted that "Wall Street lawyers had been seeking clarity on the question of if and when the balance of power should shift to shareholders in takeover situations, but hadn't been given an answer because many pill cases are settled or bids are dropped before courts have a chance to make a decision … " and that "the ruling has national implications because most major US companies are incorporated in Delaware … "

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