DEFA14A: Air Products Urges Shareholders to Reject Mantle Ridge's Nominees, Citing Lack of Experience and Potential Value Destruction

Air Products is actively campaigning against Mantle Ridge's nominees for the Board of Directors, arguing they lack relevant experience and pose a risk to the company's long-term strategy and shareholder value.

Summary

• Air Products is urging shareholders to vote for its slate of director nominees at the upcoming Annual Meeting on January 23, 2025.
• The company is actively campaigning against Mantle Ridge's nominees, claiming they are insufficiently qualified and conflicted.
• Air Products highlights its focus on the growing clean hydrogen market and its two-pillar strategy to grow its core industrial gas business.
• The company emphasizes its commitment to an orderly CEO transition and criticizes Mantle Ridge's short-term focus and lack of a coherent plan.
• Air Products defends its board refreshment efforts, including the nomination of Alfred Stern and Bhavesh V. (Bob) Patel, and argues that Mantle Ridge's nominees would disrupt the company's strategy.
• The company cites analysts' positive views on its strategic direction, including its commitment to not announce new projects until current projects are filled and have offtakes.
• Air Products highlights the experience and qualifications of its nominees, contrasting them with Mantle Ridge's candidates, whom they accuse of lacking relevant experience and having potential conflicts of interest.
• The company emphasizes CEO Seifi Ghasemi's track record of creating shareholder value and his significant personal investment in Air Products.

Sentiment

Score: 7

Explanation: The document expresses confidence in the company's strategy and leadership, while also acknowledging the challenges posed by the proxy contest. The positive outlook on future EPS growth contributes to a moderately positive sentiment.

Positives

• Air Products is focused on the growing clean hydrogen market, presenting a significant growth opportunity.
• The company has a two-pillar strategy to grow its core industrial gas business.
• Analysts view Air Products' commitment to not announcing new projects until current projects are filled and have offtakes as a positive step.
• CEO Seifi Ghasemi has created over $44 billion of shareholder value during his tenure.
• Air Products is refreshing its board with the nomination of seasoned executives like Bob Patel and Alfred Stern.
• The company is committed to an orderly CEO transition.

Negatives

• Air Products is engaged in a proxy contest with Mantle Ridge, indicating potential internal conflict and uncertainty.
• Mantle Ridge is running a disruptive and misguided campaign focused on impeding the significant progress we have made to deliver superior long-term value.
• The company criticizes Mantle Ridge's nominees for lacking relevant experience and having potential conflicts of interest.
• Mantle Ridge's CEO Designee does not bring any public company CEO or board experience.

Risks

• The proxy contest with Mantle Ridge could distract management and disrupt the company's strategy.
• Failure to successfully execute the clean hydrogen strategy could impact future growth.
• Disruptive changes to the board could derail the company's long-term growth strategy and succession planning.
• The company acknowledges global macro challenges.

Future Outlook

The company anticipates a multi-year period of higher than peers mid-teens EPS growth as its backlog starts up post FY25. The company is focused on signing offtakes for the existing backlog and will not announce new projects until current projects are filled and new projects have offtakes.

Management Comments

• Our team is seizing on the significant, growing market demand for clean hydrogen, which represents a natural extension of our leading and successful core industrial gas model.
• The long-term strategy outlined by the Board and Management team stands in sharp contrast to Mantle Ridges short-termism and lack of a plan.
• Our future success depends on overseeing an orderly transition of our CEO, Seifi Ghasemi, with someone with strong public company experience, as well as the skills and industry relationships required for this role.
• Our management team, actively overseen by our Board of Directors, continues to successfully execute our two-pillar strategy to grow our core industrial gas business while capitalizing on our first-mover advantage in the clean hydrogen market a tremendous growth opportunity now and well into the future.

Industry Context

The announcement highlights the growing importance of clean hydrogen in the industrial gas sector, with Air Products positioning itself as a leader in this market. The proxy contest reflects broader trends of activist investors seeking to influence corporate strategy and governance.

Comparison to Industry Standards

• The document references analysts' expectations of mid-teens EPS growth, suggesting Air Products aims to outperform its peers.
• The document mentions Linde as a competitor, noting that Mantle Ridge's proposed CEO candidate was passed over for the CEO role at Linde.
• The document compares the experience and qualifications of Air Products' nominees to those of Mantle Ridge, implying a higher standard of expertise.

Legal Proceedings

• CSX received a subpoena from the Securities and Exchange Commission (SEC) over an accounting restatement, as well as SEC information requests about some of the companys performance metrics.

Stakeholder Impact

• Shareholders are directly impacted by the proxy contest and the outcome of the vote on director nominees.
• Employees could be affected by changes in strategy or leadership resulting from the proxy contest.
• Customers and suppliers may be indirectly impacted by any disruptions to the company's operations or strategy.

Next Steps

• Shareholders are urged to vote on the WHITE proxy card for Air Products' nominees.
• The company will continue to communicate with shareholders regarding its strategy and the qualifications of its nominees.
• The Annual Meeting of Shareholders will take place on January 23, 2025.

Key Dates

Keywords

Air Products, Mantle Ridge, Proxy Contest, Board of Directors, Shareholders, Clean Hydrogen, CEO Transition, Director Nominees, Activist Investor, Corporate Governance