UPDATE 2-Airgas urges holders to reject Air Products bid

By Ernest Scheyder

NEW YORK, Feb 22 (Reuters) - Airgas Inc urged its shareholders on Monday to reject a $5.1 billion tender offer from larger rival Air Products & Chemicals Inc, arguing the offer substantially undervalues the industrial gas supplier.

The move was widely expected, and Airgas investors now have until April 9 to formally consider Air Products's $60-per-share cash offer.

However even if a majority of Airgas shareholders sell their shares, the Airgas board still has a 'poison pill' in place to keep any one party from acquiring too large a stake.

Allentown, Pennsylvania-based Air Products took the bid hostile earlier this month by launching the tender after being privately rejected twice by Airgas's board.

If successful, Air Products would become the biggest industrial gas company in North America, allowing Air Products to gain substantial benefits from the economy's resurgence after the recession abates.

It's that point, though, that primarily irks Airgas Chief Executive Peter McCausland, who built his company from scratch nearly 30 years ago and calls the Air Products offer 'extremely opportunistic.'

'The best thing for (Airgas) shareholders right now is for us to keep running the business because there's tremendous value creation potential,' McCausland told Reuters. 'That value dwarfs the $60 value that was offered by Air Products.'

McCausland, 59, declined to comment whether or not a higher offer from Air Products would be welcomed by Airgas's board. McCausland is the largest Airgas stockholder, with about 11 percent of outstanding shares.

'The Airgas board is very sensitive to its shareholders,' McCausland said. 'It's not a good time to sell a business.'

An Air Products representative was not immediately available for comment on Monday.

Air Products has previously said it 'fundamentally disagrees' with McCausland that Airgas's value will rise if it remains independent.

Air Products, which supplies gases such as argon, helium and nitrogen to customers in the metals, chemical and pharmaceuticals sectors, wants Airgas for its large sales and distribution network and 1,500 sales representatives.

Airgas sells canisters of specialty gases to industrial and medical facilities, and buys much of its gas from Air Products.

Meanwhile, Airgas is suing Air Products's law firm, Cravath, Swaine & Moore, LLC, arguing it has a conflict of interest because the firm represented Airgas at one point. ID: nN18207121

Bank of America Merrill Lynch and Goldman Sachs are advising Airgas. JP Morgan is advising Air Products.

Shares of Air Products were up 7 cents at $69.71 in morning trading, while shares of Airgas were down 2 cents at $63.51.

(Reporting by Ernest Scheyder and Megan Davies, editing by Dave Zimmerman and Derek Caney) Keywords: AIRGAS/AIRPRODUCTS ([e-mail]; [phone]; Reuters Messaging:[e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.