By Ernest Scheyder
DREXEL HILL, Pennsylvania (Reuters) - Airgas Incsuffered a blow to its efforts to stave off a takeover by rivalindustrial gases producer Air Products and Chemicals IncWednesday, when its shareholders ousted three board members,including its chief executive.
Shareholders also approved changes to three bylaws,including one that would bring forward a shareholder meeting toJanuary to elect more board members.
Air Products has proposed $65.50 per share forAirgas, or about $5.5 billion.
Airgas said that two of the amended bylaws, including theone to advance the shareholder meeting, were invalid becausethey failed to win the support of two-thirds ofshareholders.
"I do believe that there is potential to take two differentcompanies and make an even greater company," Air Products CEO John McGlade told Airgas shareholders at the meeting, held in aPhiladelphia suburb.
Chief Executive and now-former Chairman Peter McCausland,who founded Airgas 28 years ago, then proceeded with a long andwide-ranging argument for staying independent.
"We have a clearly documented history of solid growth inperiods of economic recovery," McCausland said. "We're close toour peak earnings that we achieved in 2008."
While he made his presentation, Air Products executives, aswell as those supporting their bid, left the room to huddle inthe parking lot. Voting ended just as McCausland finished hispresentation, and it appeared McCausland knew of the outcomeeven as he spoke.
"For someone who founded the company, you would havethought that McCausland would have been more emotional," saidMorningstar analyst Basili Alukos. "He must have already knownthat he wasn't going to win."
Indeed, copies of an Airgas press release announcing thatAir Products' nominees and proposals had won appeared at themeeting even before voting was officially complete. Airgasrepresentatives said they did not know where the press releasecame from.
For many though, Wednesday's news resolved little of the buyout battle, which has been ongoing since Air Products firstprivately approached Airgas last winter.
"Basically, nothing got solved today," said Monness,Crespi, Hardt & Co analyst Chris Shaw. "It looks like Airgas isstill going to fight, but a possible resolution may be sometimein the future."
Taking the place of the ousted Airgas directors are JohnClancey, chairman emeritus of shipping company Maersk; RobertLumpkins, board chairman of fertilizer producer Mosaic,and Ted Miller, former chief executive of wirelesscommunications tower provider Crown Castle International Corp.
It was not immediately clear who would become chairman ofthe Airgas board.
A majority of shares voted at the meeting supported thethree bylaw proposals, including one to hold the next Airgasmeeting in January 2011.
The logic of the move is that Air Product would obtain defacto control of the company if a yet-to-be-named slate ofthree more nominees were elected at the January meeting to thenine-member Airgas board.
Airgas said that because less than 67 percent of alloutstanding shares did not vote to support the bylaw proposals,it does not believe they passed under Delaware law.
Airgas, which previously voiced opposition to the bylawproposals, said it would "seek an expedited judicialdetermination on the validity of this bylaw."
Airgas has consistently said the $5.5 billion offer by AirProducts is too low, though it is roughly a 50 percent premiumto Airgas' stock price before the bid was announced.
At stake is command of the North American industrial gasmarket, which supplies oxygen, argon and other gases used inconstruction, healthcare and dozens of other industries.
Meanwhile, an Air Products lawsuit against Airgas is slatedto start next month in a Delaware courtroom. The lawsuit wasfiled months ago, but a judge waited to proceed until after theAirgas shareholder meeting.
Airgas shares rose 3.6 percent to $67.16 per share afterthe vote, while Air Products shares were down 0.2 percent at $80.06 per share. (Reporting by Ernest Scheyder; Editing by Robert MacMillan andSteve Orlofsky)