Air Products (APD) May Go Hostile in Attempt to Acquire Airgas (ARG)
Airgas Inc (ARG) is topping the Optionshouse hotlist this morning after Air Products & Chemicals (APD) said it may take a 5.1 billion dollar cash offer ($60/share) for Airgas Inc. to shareholders.
The board of directors of Airgas has rejected two prior attempts by APD for a friendly merger that would create the largest American industrial gas company.
Typically cash bids for companies destroy the long dated premium as cash has no volatility value. A hostile cash bid, however, is more complicated. Without the board of directors’ willingness to accept the bid, there is still uncertainty on how this will play out. A white knight may possibly be sought by the company.
Airgas rejected a friendly $62/share offer in December, and in 2007 the company enacted a poison pill strategy to ward off an unwanted bidder should an external company acquire more than 15% of the shares outstanding.
We are seeing over 2,000 contracts trade in the march 60 calls on the offer side at 2.35, which seems to indicate buying interest. This may be a sign that investors are expressing the belief that an enhanced bid from either Air Products or another 3rd party will come to seal the deal.
Photo Credit: Timothy Valentine
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