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Air Products & Chemicals, Inc. v. Airgas, Inc.: Court of Chancery Declines to Enjoin Airgas Poison Pill

February 16, 2011

Marking the latest chapter in the attempt of Air Products and Chemicals, Inc. to acquire Airgas, Inc., the Court of Chancery ruled for defendant Airgas. In Air Products & Chemicals, Inc. v. Airgas, Inc., C.A. No. 5249-CC (Del. Ch. Feb. 15, 2011), the Court found following trial that the Airgas board had not breached its fiduciary duties and refused to order Airgas to redeem its poison pill. Describing his holding as constrained by Delaware Supreme Court precedent, Chancellor Chandler found that the Airgas board had met its burden under Unocal to articulate a legally cognizable threat — the allegedly inadequate price of Air Products’ offer, coupled with the fact that a majority of Airgas’s stockholders would likely tender into that inadequate offer — and had taken defensive measures — including the maintenance of a stockholder rights plan — that fall within a range of reasonable responses proportionate to that threat. Concluding that the Airgas board had not breached its fiduciary duties by preventing Air Products from taking its tender offer to Airgas stockholders for over a year, the Court found that the Airgas board had acted in good faith and in the honest belief that Air Products’ $70 per-share offer is inadequate. Noting that, in his personal view, Airgas’s rights plan had “served its legitimate purpose,” the Chancellor followed the Delaware Supreme Court’s recognition that inadequate price could be a valid threat to corporate policy and effectiveness. Therefore, the Court noted, a board acting in good faith, after reasonable investigation and reliance on the advice of outside advisors, could address that threat by blocking a tender offer and forcing the bidder to elect a board majority that supports its bid.