Airgas Inc. has rejected yet another takeover offer from rival industrial gas producer Air Products and Chemicals Inc., saying a sweetened $5.9 billion bid is just not enough.
The unanimous rejection Wednesday to the $70-per-share offer highlights the Airgas board's resolve as it holds out for at least $6.5 billion, or $78 per share.
Airgas shares were down 2.9 percent at $61.40 at midday on the New York Stock Exchange.
At stake is command of the North American industrial gas market, which supplies oxygen, argon and other gases used in construction, healthcare and dozens of other industries.
Airgas has a close relationship with many small customers across the United States, an attractive factor for Air Products, which has pursued the company for more than a year.
Air Products must now weigh whether to raise its bid or stand by statements made Dec. 9 that $70 per share is its "best and final" offer.
The deadline for Airgas shareholders to tender into the hostile offer from Air Products is Jan. 14, 2011.
An Air Products representative was not immediately available to comment.
Both companies are awaiting a Delaware court's ruling on whether Airgas can use a poison pill to prevent the takeover.
Poison pills let current shareholders massively increase the float at a steep discount to ward off unwanted suitors.
Bankers from Goldman Sachs, Bank of America Merrill Lynch, and Credit Suisse told Airgas directors on Tuesday that the Air Products offer "was inadequate from a financial point of view," according to an Airgas regulatory filing.
All Airgas directors agreed with the bankers, including three new members put on the board by Air Products earlier this fall. Those directors had recently threatened legal action against Airgas unless the new bankers were hired for an outside assessment on the deal.
"I don't even think the new board members thought the company was worth only $70 per share," Monness, Crespi, Hardt & Co. analyst Chris Shaw said.
Airgas has long believed that it is worth at least $78 per share and Wednesday's rejection was widely expected on Wall Street.
"If you look at the general business conditions now versus 15 months ago when this whole thing first started, I think the Airgas business is in much better shape," Piper Jaffray analyst Thomas Hayes said.
Airgas directors believe their company is worth at least $78 a share due to the company's integration of SAP software, the improving U.S. economy and the possibility of buying smaller rivals in 2011 to take greater market share, said Hayes, who has a $75 price target on Airgas.
Airgas' 3 percent share fall on Wednesday brought the stock down near the level where it closed on Feb. 4, the day Air Products' initial offer was made public.
A plurality of Airgas shares are held by arbitrage investors who are looking for the highest price as quickly as possible.
The drop in Airgas shares is likely due to arbitrage investors exiting the stock as more traditional long-term investors return, Hayes said.
"I think the noise over the next three to four weeks is going to be a rotation," he said.
Many analysts see Airgas as a long-term investment that will only mature as Airgas' network of 1,500 sales representatives continues to expand business to the company's more than 1 million customers.
Shares of Air Products were down 4 cents at $90.49.
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