After Air Products & Chemicals Inc. raised its offer for Airgas Inc. by $4.50, to $70, a share Thursday, Airgas shares quickly fell more than $4 to less than $62.
Investors reacted to the prospect that the takeover fight, which started in October 2009, could end with Air Products walking away if Airgas does not accept the latest offer. And that offer is still far below the minimum $78 a share that the Airgas board wants for the Radnor distributor of industrial and medical gases.
Air Products, an Allentown producer of industrial gases, wants to buy Airgas to expand its customer base and made its first public offer at $60 a share in February. The latest offer, which added $377 million in cash to the previous bid of $65.50, values Airgas at $5.86 billion, not including debt.
"It is time to bring this matter to a conclusion, and we are today making our best and final offer for Airgas," John E. McGlade, chairman and chief executive officer of Air Products, said in a news release. He said his company's board had determined that it would not persist in its hostile bid indefinitely.
"If Airgas shareholders want this compelling offer, they must make their voices heard now," he said.
The $70 offer is 61 percent more than the price of Airgas shares Feb. 4, the day before Air Products made the takeover attempt public.
Airgas, which has argued that Air Products timed its offer to the bottom of the economic cycle for Airgas earnings, said in a statement that its board would review the revised offer.
The offer came one day before the companies are supposed to file briefs in a Delaware Chancery Court lawsuit. Air Products is asking Chancellor William B. Chandler III to throw out Airgas' so-called poison-pill takeover provision, which effectively prevents anyone from buying more than 15 percent of Airgas' stock without board approval.
It is not clear when the judge will rule, but if he rules in Air Products' favor, it will be a landmark decision.
"We've never had a case in Delaware where a pill has been pulled strictly on a price disagreement," said John L. Reed, a lawyer in the Wilmington office of Edwards, Angell, Palmer & Dodge L.L.P., who is not involved in the case but closely follows corporate-governance issues in Delaware.
Chandler said in a Dec. 2 letter to attorneys for the two companies that "this dispute appears to be about price and price alone."
Air Products lost a previous court fight when the Delaware Supreme Court last month overturned Chandler's decision that Airgas' next annual meeting could be held in January, just four months after the previous meeting.
Air Products wanted an earlier meeting so it could secure three seats on the Airgas board, trusting that a new majority would dump the poison pill. However, the three Air Products nominees elected in September have so far agreed with the incumbent directors that Air Products is not offering enough.
Airgas shares closed at $61.84, down $4.13.