* CEO McGlade to retire in 2014
* Three new independent directors to join board immediately
* Shares up as much as 6.9 pct
By Swetha Gopinath
Sept 26 Air Products & Chemicals Inc
Chief Executive John McGlade will retire next year and the
industrial gas producer appointed three new independent
directors, avoiding a fight over board membership with activist
investor Bill Ackman.
Air Products shares rose as much as 6.9 percent, taking
gains to almost a quarter since Ackman's Pershing Square
starting building up a $2.2 billion holding in June.
Ackman argued the company was undervalued and lagged peers
after Pershing Square revealed a 9.8 percent stake that made it
Air Products' largest shareholder.
In a deal on Thursday, Air Products said it would add the
three new independent directors immediately and three unnamed
directors would retire before the company's 2014 meeting.
The departure of McGlade in 2014 was not spelt out in the
agreement, revealed in a regulatory filing by Air Products, but
analysts said he was a prime target for Ackman.
"The main thing that Pershing Square wanted was a change in
management and they have got that without a proxy fight," said
SunTrust Robinson Humphrey analyst James Sheehan.
"Pershing will probably make other demands as well, but the
fact that they are going to have a role in selecting a new CEO
means that they will have a friendly management team to deal
Two years ago, McGlade set a target of $15 billion in annual
sales and a 20 percent operating margin by 2015, but the
company's revenues have remained stuck at just under $10 billion
Ackman has previously pushed for CEO exits at J.C. Penney Co
, Canadian Pacific Railway Ltd, Procter & Gamble
Co and several other companies in which he has invested
in the past.
The hope is that Ackman can replicate his wildly successful
turnaround strategy for Canadian Pacific at Air Products by
focusing on efficiency.
Pershing Square was supportive of the company's actions,
McGlade said in a statement.
One of the new directors, Matthew Paull, is an adviser to
Pershing Square. He will serve on Air Products' finance and
corporate governance committees.
The others are Emerson Electric Co Chief Operating
Officer Edward Monser and Rockwood Holdings Inc CEO
Pershing Square agreed not to present any proposal for
action by Air Products shareholders or to present any nominees
for the company's board at the 2014 annual shareholder meeting
or at any interim special meeting.
Without a deal, the hedge fund could have submitted at least
four director nominees at the meeting.
Air Products has lagged rivals Praxair Inc, Linde AG
and Air Liquide SA.
At the end of last year, Air Products had a 14.5 percent
operating margin, well behind Praxair's 22 percent and Linde's
23.1 percent. By focusing on volume growth rather than pricing,
Air Products has harmed profit, analysts say.
Pershing Square started building up its Air Products holding
in June and unveiled the holding at the end of July, as rumors
swirled and Air Products adopted a "poison pill" takeover
defense to stop Ackman going beyond 10 percent.
"Poison pills" are designed to forcibly dilute holdings of
an investor by issuing more shares, should the investor's stake
exceed a given threshold.
A committee of the board and an executive search firm will
begin the search for a new CEO immediately, Air Products said,
adding that McGlade would serve as chairman for an agreed-upon
transition period in 2014.
Air Products shares hit a high of $114.74 in morning trade
on the New York Stock Exchange, before easing back to $110.51.