Air Products' shares experienced a decrease in December, and their upcoming Annual General Meeting holds the potential for an exciting turn of events.
Air Products' shares took a 13.2% hit in December, as per data from S&P Global Market Intelligence. The usual suspects – end markets and operational issues – rarely cause such drastic dips. But this time, it's all about administrative matters. The industrial gas company is in the middle of a public spat with activist hedge fund Mantle Ridge.
The Great Divide
The month of December saw Air Products and Mantle Ridge engaged in a verbal tussle. Mantle Ridge, a hedge fund with a 1.8% stake in the company, wanted to shake things up. They proposed four independent directors to Air Products' board, claiming the existing board refused to collaborate on a board reconstruction process. Their proposed leaders included former Praxair CEO Dennis Reilley, who they hope will take the reins, and industry veteran Eduardo Menezes, tipped for the CEO role.
Mantle Ridge didn't stop at that. They filed a proxy statement, urging investors to vote for their nominees at the annual general meeting scheduled for January 23. They penned a letter to Air Products, highlighting the company's underperformance and management issues.
Air Products Stands Firm
Air Products' board of directors didn't mince words in their response. They criticized Mantle Ridge's track record, citing their history of "value destruction, contradictory and disorganized actions, and pursuit of company control without any serious plan." They pointed out Menezes' lack of CEO experience and Reilley's absence from an operational role and board in more than a decade. They also reminded of Mantle Ridge's three settlements with companies and the subsequent underperformance of the stocks.
Where Do We Go from Here?
The stage is set for a fierce showdown in January. Whether the share price decline is a sign of investor confidence in Mantle Ridge's plan is up for debate. The speculation will run until January 23, and nobody knows which way the wind will blow.
Enrichment insights:
- Proxy Battle Outcome: Mantle Ridge successfully nominated three of their four proposed board members, including Andrew Evans, Paul Hilal, and Tracy McKibben. Dennis Reilley was also voted onto the board, with the exact outcome for all nominees unclear.
- Shareholder Support: Leading proxy advisory firms, ISS, Glass Lewis, and Egan-Jones, recommended replacing CEO Seifi Ghasemi and other board members with Mantle Ridge's proposed nominees.
- Share Price Impact: Air Products' share price has declined due to the proxy battle and subsequent earnings outlook. The shares fell over 5% to $310.13 in Friday afternoon trading after the company's earnings outlook for the second quarter missed expectations.
- Operational and Strategic Changes: New CEO Eduardo Menezes was appointed, replacing Seifi Ghasemi. Activist investors like Mantle Ridge may push for potential changes to Air Products' strategy, particularly regarding its large-scale hydrogen projects.
Sources: [1], [2], [3], [5]
- Mantle Ridge proposed investing in Air Products by suggesting four independent directors, including the former CEO of Praxair, Dennis Reilley, and industry veteran Eduardo Menezes, who they envisioned as the CEO.
- The hedge fund's propositions were presented in a letter to Air Products' CEO, critical of the company's underperformance and management issues.
- In response, Air Products' CEO refuted Mantle Ridge's claims, citing their historical track record of "value destruction" and lack of a clear plan.
- The outcome of this CEO dispute and the influence of Mantle Ridge's proposed changes on Praxair's share price will become clear during the upcoming presentations and shareholder vote scheduled for January 23.
