Shares of industrial gas company Air Products (APD 0.59%) declined by 13.2% in December, according to data provided by S&P Global Market Intelligence. End markets and operational matters usually drive share prices, but this decline is a reaction to administrative matters — in other words, how Air Products is being run.
Air Products comes under attack
In December, Air Products’ management and the activist hedge fund Mantle Ridge engaged in a war of words instigated by the latter’s determination to restructure the board and replace Air Products CEO Seifi Ghasemi.
In a statement on Dec. 5, Mantle Ridge (owner of 1.8% of the company’s stock) proposed four independent candidates to the Board because “the Board would not engage in a collaborative process of Board reconstruction.” The four nominees include former Praxair CEO Dennis Reilley, who Mantle Ridge hopes will take a leadership role. Mantle Ridge also hopes to establish industry veteran Eduardo Menezes as CEO.
On Dec. 10, Mantle Ridge filed a proxy statement urging investors to vote for its nominees at the annual general meeting (AGM) scheduled for Jan. 23. It sent a letter to Air Products highlighting the company’s underperformance and management problems.
Image source: Getty Images.
Air Products responds
The response from Air Products’ board of directors was forthright. The Board criticizes the hedge fund’s track record, arguing that its “history of value destruction, contradictory and disorganized actions, and pursuit of company control without any serious plan did not provide any basis for engagement.”
The response then cites three successive settlements Mantle Ridge made with companies and the significant underperformance of the stocks afterward. The board also contends that Menezes has never served as a CEO and that Reilley hasn’t “served in an operating role in over 17 years or on a board of directors in over five years.”
Image source: Getty Images.
Where next?
Both parties have subsequently issued investor presentations highlighting their strategies for the company, , and the scene is set for an ongoing battle for shareholders’ hearts and minds in January.
Whether the share price declined because the market thinks Mantle Ridge will be successful is anyone’s guess, and the speculation will run until the AGM on Jan. 23.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
