February 17, 2011

Delaware Chancellor Declines to Stop Airgas Poison Pill

Cliff Neimeth of Greenberg Traurig notes (here are memos regarding this case):

As expected, on Tuesday, Delaware Chancellor William Chandler upheld the Airgas rights plan using a traditional Unocal/Unitrin analyses (and a DGCL 141 director-stockholder balance of power policy analyses) to assess the validity of maintaining the Airgas pill in place to block consummation of Air Product’s fully financed, non-coercive tender offer which all three of Airgas’ financial advisors deemed inadequate.

The decision in Air Products and Chemicals, Inc. v. Airgas, Inc., C.A. No. 5249-CC has various unique (and outcome determinitive) facts – chief among them that each of the three members of the Airgas Board who recently won election in last year’s Air Product’s short-slate proxy fight determined that Air Products $70 “final and best” offer price was clearly inadequate (by at least $8 per share).

The decision is careful not to suggest that “just say no” or “say never” is indefinitely sustainable by a target Board. But, as always is the case with Delaware’s highly context-specific decisions, the (modern pill) fact pattern has not yet presented itself where the Court of Chancery actually orders redemption in a circumstance where the target Board and management offer no meaningful strategic or financial value maximizing alternative to an unsolicited offer, and a substantial majority of stockholders have tendered into such fully financed, “financially fair” and non-coercive offer which has remained open for a protracted time period.

The last time a redemption order was “threatened” by the Delaware Court of Chancery was a few years ago when VC Strine encouraged Oracle and People Soft to settle the pill and related litigation after a protracted takeover battle and numerous increases to the tender offer price where a majority of stockholders had tendered their shares. We’ll have to wait a bit longer to see the “say yes”- pill redemption order case.