Directors of industrial-gas distributor Airgas Inc. have rejected a takeover offer from Air Products & Chemicals Inc., calling it “inadequate,” “opportunistic,” and “uncertain.” The nine-member board unanimously recommended that Airgas stockholders turn down the $60/share offer presented earlier this month.

The board also initiated a shareholders’ rights plan it had in place prior to the bid. Air Products chairman and CEO John E. McGlade stated: “This is an extremely compelling transaction with undeniable strategic and industrial logic that would benefit shareholders, customers and employees of both companies.”

The estimated value of the takeover is $7.0 billion, including $5.1 billion in equity and $1.9 billion of assumed debt.

Because Air Products & Chemicals is producer of industrial, medical and retail gases, and Airgas is a distributor and retailer of those products, the merger would form North America's largest integrated-gas company, while cutting overhead costs and increasing market reach.

Air Products proposed the merger to Airgas in October 2009. That all-stock proposal was followed by an all-cash offer in December. Anxious for a response, Air Products made its offer public in early February.

“We believe that, in an effort to distract Airgas stockholders from the grossly undervalued and highly opportunistic nature of its offer, Air Products has resorted to personal attacks and deceptive statements,” stated Airgas Chairman and CEO Peter McCausland. “Our board of directors and management team remain focused on the execution of our business strategies to deliver superior value to Airgas stockholders, and we will not allow the tactics employed by Air Products and its advisors to deter us from achieving our objectives.”

Air Products responded that its offer is attractive and that Airgas directors should agree to negotiate the merger.

“It is unfortunate that Airgas has yet again prevented its shareholders from receiving a 38-percent all-cash premium and immediate liquidity for their shares,” Airgas said in its statement. “Now is the time for Airgas shareholders to be heard and demand the independent directors of Airgas form a Special Committee advised by independent advisors that will objectively evaluate our offer. Air Products remains committed to pursuing our $60.00 cash offer and will take all necessary steps to complete it.”

Depending on how much resistance Airgas directors present, the firm’s shareholders’ rights plan may be an effective (or lucrative) takeover defense. The plan requires potential buyers to obtain directors’ approval for share purchases after acquiring a 15-percent stake. Thus, Air Products would have to obtain the board’s endorsement or pay significant premiums on their purchases, or seek to replace the current board, in order to seal the merger.