Airgas, Inc. v. Air Products and Chemicals, Inc. Case Brief Summary | Law Case Explained

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Airgas, Inc. v. Air Products and Chemicals, Inc. | 8 A.3d 1182 (2010)

Airgas versus Air Products and Chemicals features two competitors in the industrial-gas business wrangling in a desperate takeover battle.

Airgas’s corporate charter created a three-class staggered board. Directors held their seats for three years. Each year, one-third of the director seats would go up for election at the annual meeting of the stockholders. Airgas had always held this annual meeting in August or early September. Its fiscal year ended March thirty-first, so this schedule gave the directors enough time to evaluate the company’s performance and prepare an annual report before the meeting.

Airgas’s charter required a supermajority vote to enact a bylaw that changed this board structure.

Air Products decided to take over Airgas. After Airgas’s board rejected its tender offer because the offered price per share was grossly inadequate, Air Products switched to the proxy-contest route. It nominated three candidates to stand for election on Airgas’s board. It also proposed an amendment to Airgas’s bylaws moving the annual meeting of stockholders to January, which would give Air Products the chance to elect three more directors in just four months’ time.

Air Products’s three candidates were elected to Airgas’s board at the annual meeting. A bare majority of the voting shares voted to approve the January bylaw.

Airgas brought an action in Chancery Court seeking to have the January bylaw declared invalid. Airgas argued that its charter required that each director serve three full-year terms, and that by moving the annual meeting to January, Air Products had truncated those third years to just four months. Air Products countered that the charter allowed a term to expire whenever the annual meeting was held in the third year after a director’s election. The court thought the language in the bylaws was ambiguous, and therefore it should be interpreted in the light most favorable to the stockholders. Because Airgas didn’t specify that directors would serve three-year terms, the January bylaw didn’t conflict with Airgas’s charter. The court found for Air Products. Airgas appealed to the Delaware Supreme Court.

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