In re Airgas Shareholder Litigation

Court: Delaware Court of Chancery
Case Number: C.A. No. 5256-CC
Judge: Chancellor William B. Chandler III
Case Contacts: Mark Lebovitch

On February 9, 2010, BLB&G filed a shareholder class action on behalf of the City of Pontiac General Employees' Retirement System and City of Pontiac Police & Fire Retirement System (collectively, the "Pontiac Funds") challenging the self-interested and unreasonable responses of Airgas, Inc.'s ("Airgas" or the "Company") CEO and Board of Directors to a series of non-coercive offers to acquire the Company by Air Products and Chemicals, Inc. ("Air Products"). Over an extended period of months, Air Products made multiple offers to acquire Airgas—all at prices well above the Company's market price. Airgas' CEO and Board, however, refused to take any good faith action to explore Air Products' offers. Instead, the Airgas directors decided to remain entrenched behind Airgas' various defensive measures ("Defensive Measures"), including a poison pill (the "Poison Pill") and a staggered board of directors, that effectively precluded any value-maximizing transaction without their consent.

On February 11, 2010, Air Products commenced a tender offer to purchase all outstanding Airgas shares for $60 in cash. Air Products' tender offer was set to expire, unless extended, at midnight on April 9, 2010. The Airgas Board could no longer justify its "just say no" posture, which deprived Airgas' stockholders of their right to decide whether they wanted to bear the risk of continuing their investment in Airgas or take cash for their shares as provided by Air Products' tender offer. Plaintiffs, therefore, sought a determination that the Airgas Board's conduct constituted an unreasonable, disproportionate response to Air Products' offers, and a continuing breach of duty. Plaintiffs further sought an injunction and other appropriate relief to enjoin the Airgas directors from using Airgas' defensive measures to impede maximization of shareholder value, entrench Airgas' management, or favor the special interest of Airgas's CEO at the expense of the interests of the public Airgas stockholders.

On March 2, 2010, the Court granted the stipulation and order appointing the Pontiac Funds as Co-Lead Plaintiffs, and BLB&G as Co-Lead Counsel. On March 3, 2010, Co-Lead Plaintiffs filed an amended class action complaint.  For months, the parties engaged in extensive discovery.

On July 8, 2010, Air Products raised its offer from $60 to $63.50 per share.  The Airgas Board rejected the $63.50 offer and refused to redeem the Poison Pill or otherwise dismantle its Defensive Measures.

On September 6, 2010, Air Products further increased its offer to $65.50 per share.  Again the Airgas Board rejected the offer and refused to use this premium offer as a starting point for negotiations with Air Products.

On September 15, 2010, Airgas held its annual meeting of shareholders.  At the meeting, Air Products (i) succeeded in getting three nominees elected to the Airgas Board and (ii) garnered sufficient support for a bylaw amendment (the "Bylaw Amendment") which would have required Airgas to hold its 2011 annual meeting in January.  Soon thereafter, Airgas filed suit against Air Products seeking to invalidate the Bylaw Amendment.

The Court held a five-day trial from October 4, 2010 to October 8, 2010 on the Poison Pill and other Defensive Measures.

On the afternoon of October 8, 2010, the Court held oral argument on the Bylaw Amendment.  That same day, the Court issued a decision upholding the validity of the Bylaw Amendment.  However, Airgas appealed to the Delaware Supreme Court which reversed the Chancery Court's decision, invalidating the bylaw and holding that the 2011 annual meeting will be held in August or early September 2011.

On December 2, 2010, before making a decision on the Poison Pill, the Court sent counsel a letter order asking for answers to a number of questions to be addressed in supplemental post-trial briefing.  On the eve of the parties' submissions to the Court in response to the letter order, Air Products raised its offer to $70 per share and deemed this offer "best and final."  Again, the Airgas Board rejected the offer as inadequate. 

On December 23, 2010, the parties submitted their responses to the Court's letter order.  The Court then allowed the parties to take supplemental discovery relating to the $70 offer.  A supplemental evidentiary hearing was held from January 25 through January 27, 2011.  Counsel presented closing arguments on February 8, 2011.

On February 15, 2011, the Court dismissed Plaintiffs' claims with prejudice, finding that the Airgas Board had not breached its fiduciary duties owed to Airgas shareholders.  The Court found that the Board had acted in good faith and in the honest belief that the Air Products offer, at $70 per share, was inadequate.

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