Shareholder Plaintiffs' Brief

8/7/2019 Shareholder Plaintiffs' Brief

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE AIRGAS, INC. SHAREHOLDER

LITIGATION

))

)

C.A. No. 5256-CC

AIR PRODUCTS AND CHEMICALS, INC.,

Plaintiff,v.

AIRGAS, INC., ET AL.,

Defendants.

)))))))))

C.A. No. 5249-CC

SHAREHOLDER PLAINTIFFS MEMORANDUM IN RESPONSETO THE COURTS JANUARY 27, 2011 ORDER

BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP

Mark LebovitchAmy Miller Jeremy Friedman1285 Avenue of the Americas

New York, NY 10019

(212) 554-1400

Co-Lead Counsel

ROBBINS RUDMAN GELLER & DOWD LLP

Randall J. BaronA. Rick Atwood, Jr.David T. Wissbroecker 655 West Broadway, Suite 1900San Diego, CA 92101

(619) 231-1058

Co-Lead Counsel

Dated: February 2, 2011

CHIMICLES & TIKELLIS LLPPamela S. Tikellis (Del. ID No. 2172)Robert J. Kriner, Jr. (Del. ID No. 2546)A. Zachary Naylor (Del. ID No. 4439)Scott M. Tucker (Del. ID No. 4925)222 Delaware Ave.P.O. Box 1035

Wilmington, DE 19899(302) 656-2500

Co-Lead Counsel and Shareholder Plaintiffs Liaison Counsel

BARRACK, RODOS & BACINEJeffrey W. GolanM. Richard KominsJulie B. Palley3300 Two Commerce Square

2001 Market StreetPhiladelphia, PA 19130(215) 963-0600

Co-Lead Counsel

REDACTED VERSIONDated: February 3, 2011


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TABLE OF CONTENTS

1. Defendants Have Not Identified a Legally Cognizable Threat 2

a. This Dispute is All About the Price 2

b. The Airgas Shareholders Are Fully Informed andCapable to Decide Whether to Tender

5

c. Reasonable Airgas Shareholders Could Presently Prefer the $70 Per Share Tender Offer Price

7

d. There is No Prisoners Dilemma 10

e. Delaware Law Adequately Protects Non-Tendering

Shareholders

12

2. Even if the Tender Offer Does Constitute a Threat, DefendantsHave Not Carried Their Burden to Show Permanent Maintenanceof the Pill is Reasonable in Relation to that Threat

15

a. The Pill is Preclusive 15

b. The Ballot Box Offers No Alternative 16

c. Policy Factors Favor Redeeming the Pill 20

3. The Court Should Grant the Relief Sought by Shareholder Plaintiffs

21

a. Immediate Redemption of the Pill 21

b. Section 203 and Article 6 22

c. Undertaking Required of Air Products 23

d. Balance of the Equities 23

e. Attorneys Fees and Expenses 24


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Shareholder Plaintiffs seek an order requiring Defendants to redeem the Poison

Pill (Pill) of Airgas, Inc. (Airgas or the Company) and to exempt the $70 per share

cash tender offer (the Tender Offer) by Air Products and Chemicals, Inc. (Air

Products) from the strictures of 8 Del. C. 203 (Section 203) and Article 6 of the

Airgas Certificate of Incorporation (Article 6), conditioned upon Air Products

undertaking a subsequent offering period. To sustain their defenses to the Tender Offer,

Defendants must prove that the Tender Offer constitutes a threat and that their response

to the Tender Offer is reasonable in proportion to that threat. Defendants have failed in

both respects. See Pre-Trial Brief at 18-19, Post-Trial Brief at 38-44, Post-Trial Reply

Brief at 14. 1

As instructed by the Court, Shareholder Plaintiffs submit this Memorandum

setting forth their specific claims, with page references to relevant prior briefing, and

additional evidence adduced in connection with the Supplemental Evidentiary Hearing

supporting those claims.2

This Memorandum also sets forth the specific relief sought by

Shareholder Plaintiffs. 3

1 Pre-Trial Brief refers to Shareholder Plaintiffs Pre-Trial Brief, filed September 24, 2011; Post-Trial Brief refers to Shareholder Plaintiffs Post-Trial Brief, filed

November 1, 2010; Post-Trial Reply Brief refers to Shareholder Plaintiffs Post-TrialReply Brief, filed November 12, 2010; and Post-Trial Supp. Brief refers to Shareholder Plaintiffs Post-Trial Supplemental Brief, filed December 10, 2011.

2 Citations herein to S.E.H. Tr. refer to the transcript of the SupplementalEvidentiary Hearing held January 25-27, 2011. Exhibit refers to the Joint Exhibit listsubmitted to the Court in connection with the Trial and the Supplemental EvidentiaryHearing.


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1. Defendants Have Not Identified a Legally Cognizable Threat

a. This Dispute is All About Price

There is no evidence that the Tender Offer represents a threat to Airgas corporate

policy or effectiveness. Rather, the evidence shows that the dispute between Airgas and

its shareholders is strictly about whether the fixed price Air Products is offering today is

more attractive than the potential value that Defendants may or may not be able to create

at some undefined point in the future through execution of managements business plan.

Airgas shareholders are more than capable of making an economic decision about their

investments. A disagreement over price alone does not constitute a legally recognized

threat. See Pre-Trial Brief at 21-26, Post-Trial Brief at 26-29, 44-49, Post-Trial Reply

Brief at 14-18, Post-Trial Supp. Brief at 4-10.

The supplemental evidence confirms that the Airgas Boards consideration of the

Tender Offer focused strictly on price and, further, that the Airgas Board never concluded

that the Tender Offer poses any threat to Airgas corporate policies or effectiveness.

For instance:

x In response to the Courts inquiry, Mr. McCausland failed to identify anythreat to Airgas business posed by the Tender Offer, and conceded thatany uniqueness of Airgas as a company likely goes to value. 4 In fact,

3

A proposed form of Final Judgment Pursuant to Rule 54(b) has been submittedherewith.

4 S.E.H. Tr. at 300:8-301:19 (McCausland).


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according to Mr. McCausland, an inadequate offer is a threat whether or not it is structurally coercive. 5

x

6

The December 21, 2010 minutes of the Airgas Board meeting (Minutes) 7 and

Schedule 14D-9/A, which members of the Board confirmed to be complete and accurate,

and the testimony at trial, show that the Airgas Board did not meaningfully discuss

redeeming the Pill, the protections available to Airgas shareholders in a second-step

transaction, or the now-claimed coerciveness of the Tender Offer. 8 For example:

x There was no discussion of coercion or threat at the December 21, 2010meeting and no indication in the Minutes that these topics were discussed. 9


6 Exhibit 1090,

7 Exhibit 1063.

8 Indeed, not a single director or advisor during deposition or at trial could identifya specific discussion concerning any threat or coercion posed by the Tender Offer or anyspecific discussion about pulling or maintaining the Pill.

9 Exhibit 1063, S.E.H. Tr. at 242:5-244:6, 265:14-266:24, and 269:16-270:3(McCausland). See also Exhibit 1094,


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x The lone mention of the Pill during the December 21, 2010 Board meetingwhen the $70 offer price was considered was Mr. Clanceys statement thatthe Pill should be protected, but there was no discussion of this point andother board members at the meeting conceded they did not know what Mr.

Clanceys pronouncement even meant. 10

x Airgas Board members never discussed whether the Air Products offer was coercive or that shareholders might feel pressured to tender. 11

x All of the reasons for the Boards recommendation not to tender are in theSchedule 14D-9/A filed December 22, 2010, 12 which Mr. McCauslandtestified is an accurate statement of the Airgas Boards position, and theSchedule 14D-9/A does not reference any coercion or threat. 13

x Any views members of the Airgas Board have about the Tender Offer being coercive relate to the structure of a tender offer generally and are not based on any discussion amongst the Airgas Board or any discussions withany Airgas shareholders. 14

Given all of this evidence, certain Defendants testimony that all those issues

were on the top of their minds or implicit in discussions is just not credible.

10S.E.H. Tr. at 150:5-152:20 (Miller); Exhibit 1090,

16.

11 S.E.H. Tr. 153:3-154:13, 157:6-9, and 158:10-21 (Miller); see also Exhibit 1095,

Exhibit 1090,

12 S.E.H. Tr. 435:7-17 and 436:7-14 (Clancey).

13 Exhibit 659, S.E.H. Tr. at 244:7-12 and 246:17-23 (McCausland).

14


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b. The Airgas Shareholders Are Fully Informed and Capable to DecideWhether to Tender

There is no basis to infer, much less conclude that Airgas shareholders are unable

to make an informed decision for themselves whether the Air Products Offer of $70 per

share is in their own economic interests. See Pre-Trial Brief at 27-33, Post-Trial Brief at

23-26, 51-56, Post-Trial Supp. Brief at 18-20. Indeed, the evidence is overwhelmingly to

the contrary and supports the conclusion that the information available to the

shareholders is more than adequate. 15

x The Airgas Board has had a year behind the Pill to disseminate itsrecommendations and all material information to the Airgas stockholdersconcerning Airgass value and the Air Products Tender Offer.

x The Airgas stockholders have all material information necessary to decidewhether to accept the Tender Offer, including the Boardsrecommendation not to tender, 16 the Boards stated beliefs that $70 per share is clearly inadequate and that Airgas has a value of at least $78 per share in a sale, 17 the projections and views of analysts which closelycorrespond with managements projections, 18 analysts price targets over the next twelve months, 19 and earnings guidance from the Company

15 S.E.H. Tr. at 454:1-5 (Clancey). See also , S.E.H. Tr. at 189:19 190:6(McCausland)(Testifying that Airgas has made all the required disclosures), Exhibit1095, Exhibit 1093,

16 See Exhibit 1094,

17 Exhibit 659 at 3.

18 See S.E.H. Tr. at 395:9-19 (DeNunzio).

19 S.E.H. Tr. at 21:21-29:22 (Huck).


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including the Boards projections based on mid-term goals in theCompanys 5-year plan. 20

x To the extent the Airgas directors have more knowledge about the

Company and its prospects than the public stockholders, as is true in any public company, such knowledge is included in the Boardsrecommendation and statements regarding the inadequacy of the $70 priceand value of Airgas in a sale. 21

x The Airgas Board believes it has clearly conveyed its message regardingthe inadequacy of the Tender Offer and the value of Airgas in a sale. 22

x Virtually the entire Supplemental Evidentiary Hearing was conducted inopen Court, including extensive testimony by Messrs. McCausland andDeNunzio regarding the basis for Defendants belief that they can create$78 per share in value within a year or so. 23

20 S.E.H. Tr. at 190:7-16 (McCausland).

21 For example, Mr. McCausland qualifies his prior trial testimony to say that whileall information required to be disclosed has been disclosed, the Board always will havemore and better information than the public. S.E.H. Tr. at 268:3-17 (McCausland). Heacknowledges that his position is a mere truism. S.E.H. Tr. at 269:1-7 (McCausland).Defendants cannot point to any piece of information that needs to be disclosed, and anyinformation the Board possesses that is confidential is incorporated into the Boardsrecommendation. See Exhibit 1090, and Exhibit 1094,

.

22 Mr. McCausland testified that he has made it abundantly clear that the Board believes $70 is inadequate. S.E.H. Tr. at 253:4-8, 254:6-8, and 254:14-20 (McCausland).

See also Exhibit 1093,

23 See e.g. , S.E.H. Tr. at 396:1-4 (Mr. DeNunzio acknowledging that the proceedingwas public and being broadcast).


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x The Airgas stockholders are sophisticated. 24

If the Court harbors any concern about the completeness of the information

available to the public regarding the Boards view of the adequacy of the $70 price or

value of Airgas, those concerns can be remedied by ordering Defendants to disclose on a

Schedule 14D-9 the valuation analyses provided to the Board by the three (3) financial

advisors which are based on managements refreshed 5-year plan.

c. Reasonable Airgas Shareholders Could Presently Prefer the $70 PerShare Tender Offer Price

The Shareholder Plaintiffs take no position as to the adequacy or fairness of

the $70 per share price of the Tender Offer. 25

See Post-Trial Brief at 29-37, Post-Trial Supp. Brief at 16-18, 20-21.

x It is undisputed that the $70 price is a premium to the present undisturbed

stock price.26

24 See Exhibit 1090, As one of the new directorstestified, there are no facts to suggest that Airgas shareholders would tender into an offer they considered inadequate. S.E.H. Tr. 153:3-6 (Miller). There are also no facts thatsuggest Airgas shareholders would be incapable of making an economic decision on theAir Products Tender Offer. S.E.H. Tr. at 154:14-155:3 (Miller).

25 The relief sought by Shareholder Plaintiffs will leave, undisturbed, entire fairnessand appraisal remedies in any second-step merger by Air Products, should it acquire a

majority of the Airgas shares in the Tender Offer.26 S.E.H. Tr. 417:19-22 (Clancey testifying his view that unaffected price is $61)


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x The Companys 5-year Plan includes risks, and Defendants cannotguarantee the achievability of the Companys 5-year Plan. 27

x No one can control or guarantee at what price Airgas stock will trade inthe future. 28

x No one can guarantee the macroeconomic assumptions in the Plan. 29

x There is an appreciable chance of a double dip recession. 30

27

S.E.H. Tr. at 280:22-281:18 (McCausland).

S.E.H. Tr. at 281:19 282:6 (McCausland). Seealso S.E.H. Tr. 363:9-12 (DeNunzio testifying that Credit Suisse has not tested theachievability of the 5-year plan),

.

28 See, e.g. , S.E.H. Tr. at 280:6-9.

29 See S.E.H. Tr. 391:13-392:1 and 392:9-12 (DeNunzio). See also Exhibit 1095,

30

S.E.H. Tr. at 264:19:-265:2 (McCausland).


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x The Board did not ascertain the potential effects of a double dip recessionon the Companys prospects. 31

x Notwithstanding the Boards stated belief that the Company is worth atleast $78 per share in a sale, no other bidder has emerged to offer morethan $70 per share, 32

33

.

x

In sum, the $70 price offers absolute immediate value, while Defendants only

proposed alternative is for Airgas shareholders to bear the risk that management might

achieve projections and that Airgas will then be worth greater value in the future.

31 There was no discussion with bankers about the value of Airgas stock if there is adouble dip recession. S.E.H. Tr. at 181:3-182:1 (Miller) and 277:15-22 (McCausland).

. S.E.H. Tr. at 279:19-24 (McCausland).32 See S.E.H. Tr. 741:13-742:8 (Morrow).

.


.

34 S.E.H. Tr. at 282:13-283:10, 283:17-284:10 (McCausland).

35 S.E.H. Tr. at 292:11 294:4 (McCausland).


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d. There is No Prisoners Dilemma

Defendants prisoners dilemma theory is merely a legal tactic to manufacture a

threat where none exists. See Post-Trial Reply Brief at 17-18. Taken to its logical

conclusion, the so-called prisoners dilemma argument would render every tender offer

coercive.

The Boards decision to maintain the Pill was not based on any concern of a

prisoners dilemma. The Board never discussed the prisoners dilemma concept and

did not articulate a prisoners dilemma threat as one of its reasons for recommending

against the Tender Offer.

x The Board never discussed the concept of a prisoners dilemma. 36

x The Minutes do not reflect any discussion or even reference to the conceptof prisoners dilemma. 37

x The Schedule 14D-9/A does not discuss the prisoners dilemma concept.The Schedule 14D-9/A does not list prisoners dilemma or coercionamong the reasons provided in the Schedule 14D-9/A for the Boards

recommendation against the Tender Offer. 38

36 S.E.H. Tr. 157:10-22 (Miller), 438:9-12 (Clancey), 369:8-11 (DeNunzio). Seealso Exhibit 1090,

37 See Exhibit 1063.

38 Exhibit 659, S.E.H. Tr. 435:7-17, 436:7-437:18 (Clancey).


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x Defendants expert Mr. Harkins, who introduced the prisoners dilemmatheory in this litigation, never discussed the concept with the Board andnever even advised the Board. 39

x The Board heard of the concept of a prisoners dilemma in the contextof Air Products Offer only in connection with this litigation. 40

Even if the Board had considered the possibility of a prisoners dilemma as

justification for blocking the Tender Offer, it could not reasonably rely on this theory to

do so because the prisoners dilemma provides no basis for shareholders to be

protected from themselves. 41 See Post-Trial Brief at 49-50, Post-Trial Supp. Brief at

18-20.

39 See S.E.H. Tr. 554:2 - 555:6 (Harkins). See also Exhibit 1099,

.

40 S.E.H. Tr. 438:13 439:5 (until his deposition, Mr. Clancey had never heard theconcept discussed in the context of the Air Products offer) and157:23-158:3 (Mr. Miller only heard the term when meeting with counsel for his deposition preparation).

41 Mr. McCausland believes he has a duty to protect arbitrageurs from themselves.S.E.H. Tr. at 250:20-252:20.


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x As admitted by Mr. Harkins, investors weigh a multitude of factors whendeciding whether to tender, and those factors may make the prisonersdilemma a non-issue to the investors decision. 42

x At trial, Mr. Morrow stood by his prior deposition testimony: You know,you would have to ask each one of [the long-term investors] why they soldit. My guess is you would get many different reasons, all reasons in mymind well thought out by them. What the reasons were, I have no idea.All I know, they will not sell if they were not satisfied with the price. 43

x If shareholders believe the offer price already exceeds the Companys fair value, then shareholders would rationally tender, irrespective of anysupposition about how short-term investors or other investors may or maynot behave. 44

e. Delaware Law Adequately Protects Non-Tendering Shareholders

The ownership positions of Mr. McCausland and other directors and officers of

Airgas effectively preclude Air Products from taking advantage of 8 Del. C. 253. See

Post-Trial Reply Brief at 18. Delaware law thus already provides adequate protections

for shareholders who choose not to tender. When Air Products seeks to close the back

end as it has committed to do Air Products will be subject to entire fairness and to

42 See S.E.H. Tr. 595:17 - 596:4 (Harkins) (Q: And so the extent to which the prisoners dilemma matters in any particular situation depends on all of the facts andcircumstances. Right? A: Yes.) and 596:5-12 (Mr. Harkins conceded that factors, suchas the relationship between the perceived market value of the stock free of any takeover offer, the bid price, the perceived value of the company, and the number of shareholdersheld by the arbs will dictate whether the dilemma is an important issue, a minimalissue, or an issue at all).

43 S.E.H. Tr. 747:22-748:14 (Morrow).

44 S.E.H. Tr. 598:19-599:18 (Harkins).


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claims for appraisal rights. See Post-Trial Reply Brief at 1-3. With those powerful

protections in place, there is no cognizable threat that non-tendering shareholders will be

forced to accept less than fair value for their shares. The evidence supports this

conclusion:

x Appraisal was not discussed by the Board at any of its meetings. 45

x If Air Products acquires more than a majority of shares in its tender offer,the remaining shareholders will be afforded appraisal rights in any follow-on merger. 46

x A majority shareholder owes fiduciary duties to the minorityshareholders. 47

There is no need to graft 8 Del. C. 251-style board approval onto tender offers.

See Post-Trial Supp. Brief at 2. Contrary to Mr. McCauslands view that shareholders,

including arbitrageurs, need to be protected from themselves and that any decision to

45 S.E.H. Tr. 446:12-15 (Clancey).

46 See S.E.H. Tr. at 291:13-19, 444:13-

18 (Clancey) and S.E.H. Tr. at 728:14-729:23 (Morrow viewing an appraisal option as

limiting shareholder concerns that they can never get more than the minimum clearing price in a tender offer).

47 See S.E.H. Tr. at 287:10-14 (McCausland) and 445:20-446:2 (Clancey).


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accept the Tender Offer belongs to board rather than the shareholders, 48 the General

Assembly has imposed no such requirement and none should be created here.

48 See S.E.H. Tr. at 259:23-260:23 (McCausland) (It is not the shareholdersdecision to make a determination whether an offer should be accepted or not. Its theBoards job.).


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2. Even if the Tender Offer Does Constitute a Threat, Defendants Have NotCarried Their Burden to Show Permanent Maintenance of the Pill isReasonable in Relation to that Threat

a. The Pill is Preclusive

The Pill is preclusive to the Tender Offers success, and Defendants cannot

demonstrate that it is a reasonably proportioned response. See Post-Trial Reply Brief at

24-26, Post-Trial Supp. Brief at 12-16. In addition,

x The Board never discussed whether it should keep the Pill in place andnever discussed whether the Board had an obligation to review

periodically whether it should or should not keep the Pill in place. 49

x The Board intends to let the Pill stand indefinitely, even if the Board believes that the $70 offer is Air Products best and final offer. 50

x The Board intends to limit Company shareholders to only one option if they would like an opportunity to tender they must vote the Board out. 51

49 S.E.H. Tr. at 152:21-153:2 (Miller). See also Exhibit 1090,, Exhibit 1096,

50 S.E.H. Tr. at 231:16-20 (Mr. McCausland does not believe there is a time limit onthe pill),

,

51 S.E.H. Tr. at 230:2-18 (Mr. McCausland believes Board is entitled to make thefinal determination on adequacy of the offer and the shareholders only recourse is to

vote the Board out) and 170:17-171:9 (Mr. Miller believes shareholders only recourse isto replace the Board). See also Exhibit 1090,


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b. The Ballot Box Offers No Alternative

There is no evidence that a shareholder vote at a special election provides a viable

alternate route for the Tender Offers success. See Post-Trial Supp. Brief at 11-12.

Notably, while Airgas and Air Products proxy experts differ on the achievability of a

67% removal vote, they agree on one thing - neither expert has ever seen an insurgent

obtain two-thirds of the outstanding shares in a contested control election. 52 Moreover,

even if a 67% removal vote could be achieved, the ballot box alternative is based on a

flawed premise. Airgas assumes the newly elected board would reach a different

conclusion than the current directors. 53 The actions of the three directors elected at

Airgas 2010 annual meeting demonstrate the inefficacy of the ballot. In other words,

even if Air Products obtains the necessary consents to call a special meeting, and at the

meeting obtains the support of 67% of the outstanding shares over Defendants

opposition, Air Products and the Airgas shareholders will find themselves in exactly the

same predicament they face today.

In any event, Defendants failed to prove with evidence (as opposed to

supposition) that a 67% removal vote is achievable over the Boards objections:

x While Defendants proxy expert Peter Harkins opined that Air Productscould realistically attain the 67% level by presenting Airgas shareholders

52 See S.E.H. Tr. 759:10-19 (Morrow) and 658:4-10 (Harkins).

53 Both Mr. McCausland and Mr. Harkins testified that they believe newly electeddirectors would have a fiduciary duty to maintain the Pill. S.E.H. Tr. 574:24 577:10(Harkins) and 226:24-227:15 (McCausland).


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with a sufficiently appealing platform, 54 Harkins refused to define what price point would constitute an appealing platform, but neverthelessassumed one for his opinion. 55

x Mr. Harkins made a litany of other speculative assumptions about how astatic shareholder base would vote and devised a mathematical plug toensure that his model supported the conclusion that a 67% vote isattainable. 56

x The speculative nature of Mr. Harkins assumptions was underscored byhis concession that he really does not know how shareholders will act if given the chance to tender into Air Products offer. 57

54 . At the supplemental hearing, he did an about-face,

testifying that even though Air Products could only garner 55% support for its minorityslate at the 2010 annual meeting, Air Products could now achieve 67% support to removethe entire Airgas Board. See S.E.H. Tr. 522:4-21, 528:2-10 (Harkins). Harkins admitted,however, that the shareholder vote in September 2010 was on a $65.50 offer and wasintended simply to maximize their options. S.E.H. Tr. at 665:23-666:7 (Harkins).

55 S.E.H. Tr. 591:22 592:4 (Mr. Harkins testified that he could not know what wassufficiently appealing until shareholders acted.) and 659:16 660:15 (Harkins).

56 See S.E.H. Tr. 467:16 482:21 (Harkins).

57 For example, with respect to the voting behavior of dual-holders of both Airgasand Air Products stock, Mr. Harkins testified:

A. No, because we don't know what -- dual holders might be supportive of theoffer and they might be opposed to the offer. I am predicting that for an appealingoffer, certain of those dual holders that we discussed in my deposition are likelyto vote for the Air Products initiative to remove directors.

S.E.H. Tr. 603:12-17 (Harkins).


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Mr. Harkins assumed that ISS would support Air Products removal proposal. 58

Mr. Harkins, however, conceded that ISS has never supported a hostile bidders proposed

majority slate in a director election.59

The only evidence Defendants provided to support

the inference that ISS will support Air Products at the special meeting is Morrow & Co.s

interview of a former ISS employee. However, as Mr. Morrow accurately pointed out

under cross-examination, the views in the interview -- which nowhere say that ISS would

support a hostile bidder's majority slate -- are not even views that can be attributed to

ISS. 60

Mr. Morrow declined to predict how all or any subset of shareholders would

actually vote, 61 explaining that even in his professional practice he would not predict the

58 S.E.H. Tr. 479:23-480:15 (Harkins).

59 S.E.H. Tr. 540:1-10 (Harkins).

60 S.E.H. Tr. 776:16-777:10 (Morrow). Mr. Youngs statement does, however,succinctly describe the current circumstances:

Over the long-run, however, we believe that after the target company hashad a chance to find a white knight willing to pay more, or has hadsufficient time to convince its shareholders why the offer is not inshareholders best interests, it is shareholders which should have the rightto accept or reject an offer without interference by the board

Exhibit 1001G.

61 See S.E.H. Tr. 760:7-761:2 and 776:16-777:21 (Mr. Morrow testifying that evenif one does speak with arbs and hedge funds one cannot predict their vote with certaintynor can one predict institutional shareholder votes without speaking with them.).


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outcome of a vote until the proxies are being collected. 62 Moreover, Mr. Morrow

unequivocally opined that achieving the 67% level required for removal is impossible

absent board support, regardless of the price offered.63

Finally, the timing of the ballot box alternative renders it ineffective as a route to

circumvent the Pill. See Post-Trial Supp. Brief at 1-2, 12. Whether Airgas shareholders

attempt to remove directors through a special meeting 64 or instead choose to vote out the

Board at the next annual meeting, 65 shareholders will be precluded from tendering until at

least late summer. There is no guarantee that Air Products will be able to justify to its

own shareholders keeping the Tender Offer open for this lengthy period.

62 See S.E.H. Tr. at 700:7-14 (Morrow) (We do not make predictions until the last48 hours, when we see where we stand, in every proxy fight.). See also S.E.H. Tr.723:1-8 (Q: [Y]ou told me that you would never predict what the arbs or hedge fundsare going to vote until the game is over. Correct? A: Thats correct.).

63 See S.E.H. Tr. 701:19-702:5 (Morrow) (Regardless of the price, if managementstill opposes it and is willing to fight against it and has a position, yes. And I do that

based on experience.). S ee also S.E.H. Tr. 769:14-21 (Morrow) (You can get a two-thirds vote if both sides work on it. You cannot get it in a proxy contest, where one sideis opposing, the other sides trying to get two-thirds vote. Thats all Im saying in thiswhole thing.).

64 If holders of 33% of Airgas outstanding shares request a special meeting toremove directors, such meeting will be held between 90 and 120 days from the date of such request.

65 Airgas next annual meeting of shareholders will be held approximately inSeptember 2011.


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c. Policy Factors Favor Redeeming the Pill

The policy issues implicated by this litigation favor granting the relief requested.

Hostile offers are an important avenue to unlocking shareholder value. The poison pill

can be a useful tool in maximizing the price attained through such offers. However, the

circumstances present here (including, among other things, the passage of over a year

since Air Products initial offer, the lack of a threat to corporate policy, the volume of

information provided to Airgas shareholders, the lack of alternatives to Air Products

offer, the risk borne by shareholders if they are forced to let Defendants execute on their

five-year business plan, and the bona fides of Air Products as a bidder with full financing

and the ability to close the offer) favor giving shareholders the opportunity to decide

whether to put faith in Defendants ability to execute on their plan or to take the cash on

the table. At its core, Defendants position is that unsolicited tender offers are themselves

coercive, and should be deterred in all circumstances (at least to the extent the target

board does not support the offer). This Court should not accept Defendants invitation to

make the hostile offer a thing of the past in Delaware.


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3. The Court Should Grant the Relief Sought by Shareholder Plaintiffs

a. Immediate Redemption of the Pill

Shareholder Plaintiffs seek immediate redemption of the Pill. Previously,

Shareholder Plaintiffs had sought a 30-day window prior to the redemption of the Pill.

See Post-Trial Reply 26-27. At the time Shareholder Plaintiffs had proposed the 30-day

window,

.66 .67

.68

.69 And even though Mr. McCausland maintains regular contacts within the

industry, 70 no superior bidder has emerged.

Air Products representatives testified that $70 is the best and final offer and

that Air Products management does not intend to recommend a higher price to the Air







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Products board. 71 What few discussions have occurred between Airgas and Air Products

have been futile, and the Airgas Board has no intention to do anything further with

respect to Air Products $70 offer.72

In view of those factors, Shareholder Plaintiffs

believe that immediate redemption of the Pill is warranted and justified.

b. Section 203 and Article 6

The Shareholder Plaintiffs did not previously seek neutralization of Section 203

or Article 6 in connection with an acquisition of Airgas by Air Products. Based on the

Supplementary Evidentiary Hearing, the further passage of time during which no

alternative has emerged and the Defendants stated position that the best alternative to the

Tender Offer is to execute Airgas 5-year plan, 73 the Shareholder Plaintiffs now join Air

Products requests that this Courts Final Judgment include relief to neutralize Section

203 and Article 6. The Shareholder Plaintiffs believe that Delaware law governing the

fiduciary duties of directors and controlling stockholders, the exacting entire fairness

standard of review and the statutory right of appraisal, together provide the necessary and

sufficient protections to the non-tendering Airgas stockholders in a back-end merger.

After this already 14-15 month process, the requirements of Section 203 and Article 6

only serve to add procedural hurdles which would likely cause unnecessary delay to the

consummation of a transaction. As with the 30-day window Shareholder Plaintiffs

71 S.E.H. Tr. at 106:10-13 (Davis), 108:12-15 and 109:8-12 (McGlade).


73 See S.E.H. Tr. at 204:19-206:1 (McCausland).


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originally sought prior to removal of the Pill, the delay to satisfy Section 203 and Article

6 at this point provides no prospect for any incremental benefit for Airgas shareholders.

Shareholder Plaintiffs proposed form of judgment thus includes removal of the Pill and

neutralization of Section 203 and Article 6, but further specifies that the fiduciary duties

of Air Products and the Airgas directors in the event Air Products acquires a majority of

the stock of Airgas shall not be restricted or abridged.

c. Undertaking Required of Air Products

Messrs. McGlade and Huck testified that Air Products is committed to obtaining

100% ownership of Airgas and to do so quickly after a successful Tender Offer. 74

Shareholder Plaintiffs accept that representation made to the Court. Further, Air Products

representatives also testified that Air Products would accept a subsequent offering period

at the $70 per share Tender Offer price as a condition to redemption of the Pill. 75

Shareholder Plaintiffs proposed form of Final Judgment Pursuant to Rule 54(b) includes

this undertaking by Air Products as a condition to the relief sought.

d. Balance of the Equities

The relief sought by Shareholder Plaintiffs balances the equitable interests of all

Airgas Shareholders. See Post-Trial Supp. Brief at 21-23. Those Airgas shareholders

who desire immediately the opportunity to tender their shares into the Tender Offer can

do so. The condition Shareholder Plaintiffs propose to impose on Air Products will

74 S.E.H. Tr. at 110:17-22 (McGlade) and 15:15-17 (Huck).

75 S.E.H. Tr. at 111:13-18, 112:13-17 (McGlade) and 15:21-16:6 (Huck).


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(302) 656-2500

Co-Lead Counsel and Stockholder Plaintiffs Liaison Counsel

BARRACK, RODOS & BACINEJeffrey W. GolanM. Richard KominsJulie B. Palley3300 Two Commerce Square2001 Market StreetPhiladelphia, PA 19130(215) 963-0600

Co-Lead Counsel

BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP

Mark LebovitchAmy Miller Jeremy Friedman1285 Avenue of the Americas

New York, NY 10019(212) 554-1400

Co-Lead Counsel

OF COUNSEL:

ROBBINS GELLER RUDMAN& DOWD LLP

Randall J. BaronA. Rick Atwood, Jr.David T. Wissbroecker 655 West Broadway, Suite 1900San Diego, CA 92101(619) 231-1058

Co-Lead Counsel

BERMAN DEVALERIOLeslie R. SternOne Liberty Square


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Boston, MA 02109(617) 542-8300

Member of Plaintiffs Executive Committee

SAXENA WHITE P.A.Joseph E. White III2424 North Federal HighwayBoca Raton, FL 33431Telephone: (561) 394-3399

Member of Plaintiffs Executive Committee


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CERTIFICATE OF SERVICE

I hereby certify that on this 3 rd day of February, 2011, a copy of the foregoing was

served electronically via LexisNexis File & Serve upon the following attorneys of record:

Kenneth J. Nachbar, EsquireJon E. Abramczyk, EsquireWilliam M. Lafferty, EsquireJohn P. DiTomo, EsquireRyan D. Stottman, EsquireMORRIS NICHOLS ARSHT &

TUNNELL LLP1201 North Market StreetWilmington, DE 19801

Pamela S. Tikellis, EsquireRobert J. Kriner, Jr., EsquireCHIMICLES & TIKELLIS LLP222 Delaware Ave.Wilmington, DE 19899

/s/ Berton W. Ashman, Jr.Berton W. Ashman, Jr. (No. 4681)

Shareholder Plaintiffs' Brief

Documents

Transcript of Shareholder Plaintiffs' Brief