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17 November 2015 By Kevin Allison

Airgas has played a slick game of long-term greedy. Shareholders in the industrial gas supplier are to receive $10.3 billion, in cash, from selling to Air Liquide. That’s a 51 percent premium over the shares’ 30-day average, meaning Airgas has outperformed rivals and the S&P 500 since early 2010, despite being the target of an unsuccessful hostile bid.

That offer came from Air Products, which in February 2010 offered $5.1 billion for its smaller rival – a 38 percent premium. Air Products raised its unsolicited offer, won three board seats and even took its quarry to court over a poison pill before abandoning its bid in early 2011.

Subsequent events have vindicated Airgas founder and former Chief Executive Peter McCausland’s determined resistance. The U.S.-focused group’s profitability improved steadily over the next four years; hiccups at Air Products, meanwhile, convinced activist investor Bill Ackman to take a big stake.

Before Tuesday’s 29 percent gain, Airgas’s shares had returned some 171 percent, including reinvested dividends, since Air Products uncorked its initial bid almost six years ago. The erstwhile wannabe buyer managed a 121 percent total return, just a whisker ahead of the S&P 500, while Air Liquide returned 134 percent over the same period.

By striking a deal with their larger French rival, McCausland, now executive chairman and Mike Molinini, chief executive since 2012, have added another $2.7 billion to Airgas’s market cap. Investors who stuck with them since early 2010 have pretty much tripled their money.

And the two bosses have even convinced Air Liquide to pay up: the $300 million or so of costs the acquirer hopes to cut are currently worth a little over $2 billion after accounting for tax and the time value of money – less than the premium it’s paying. Talk about going out on a high note.


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