Air Products and Chemicals is an industrial gases company that focuses on serving energy, environmental, and emerging markets. The company provides essential industrial gases, related equipment, and applications expertise to customers in various industries, including refining, chemicals, metals, electronics, manufacturing, and food. Additionally, Air Products develops, engineers, builds, owns, and operates clean hydrogen projects to support the transition to low- and zero-carbon energy in the heavy-duty transportation and industrial sectors. The company also offers turbomachinery, membrane systems, and cryogenic containers globally, with operations in approximately 50 countries.
As of now, Air Products and Chemicals has a stock market value of $73.83B ($332.10 per share).
Recently, activist investor D.E. Shaw & Co has engaged with Air Products’ board to propose various steps to enhance shareholder value. These steps include improving capital allocation, refreshing the board, and restructuring executive compensation.
Despite Air Products’ stable and low-risk industrial gas business, the company missed out on industry consolidation opportunities in recent years. This led to a shift in strategy towards more speculative investments, particularly in clean hydrogen projects. While management believed that these investments would be rewarded with a higher stock price, investors disagreed, resulting in underperformance compared to peers.
Following D.E. Shaw’s engagement, Air Products is now facing pressure to de-risk its large project commitments, sign offtake agreements, and limit annual capital expenditure. The activist investor also demands a clear CEO succession plan, refreshment of the board, and restructuring of executive compensation to improve alignment with performance metrics.
D.E. Shaw’s activism is part of a trend where the firm uses activism as a tool to create shareholder value. The investor has a track record of success in its engagements and is known for its deep quantitative and technical research.
It is not uncommon to see multiple activists involved in the same stock, especially when there are perceived issues with capital allocation and corporate governance. In the case of Air Products, another activist investor, Mantle Ridge, has also expressed concerns similar to D.E. Shaw’s and has announced a significant position in the company.
Both activists prioritize CEO succession planning and capital allocation refocus in their campaigns. While D.E. Shaw is seeking three seats on Air Products’ board, including one for an impressive public company executive with a track record of creating shareholder value, Mantle Ridge has historically reconstituted boards with its founder, Paul Hilal. However, both activists aim to bring about positive changes for shareholders through better governance and strategic decision-making.
Overall, the involvement of multiple activists in Air Products’ stock provides the company with options for potential settlements that align with shareholder interests. Regardless of the outcome, it is expected that changes will be made to address the issues raised by the activists and improve the company’s performance and governance.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.