Air Products Sends Letter to Shareholders Highlighting Reasons to Support Its Board Nominees

Rhea-AI Summary

Air Products (NYSE: APD) has issued a letter to shareholders regarding its upcoming 2025 Annual Meeting, urging them to vote 'FOR' the company's nominees on the WHITE proxy card. The company strongly disagrees with ISS' opinion and presents two contrasting choices for shareholders:

1. Support Air Products' nominees to maintain stability, growth, and long-term value creation, including a planned CEO transition with a new President to be named by March 31.

2. Support Mantle Ridge's nominees, which the company warns could lead to growth and value destruction.

The company highlights its ongoing clean hydrogen strategy, including the NEOM project in Saudi Arabia and Darrow project in Louisiana. Air Products criticizes Mantle Ridge's nominees for lacking relevant experience and having no alternative plan, warning that their appointment could create significant instability in company leadership and strategic direction.

Positive

• Planned orderly CEO transition with new President to be named by March 31
• NEOM project in Saudi Arabia expected to be fully committed within 6-12 months
• Darrow project in Louisiana progressing with planned anchor offtake customer and equity partner
• Board renewal with 6 of 9 directors appointed in past 5 years if elected

Negative

• Leadership uncertainty amid proxy contest with Mantle Ridge
• Potential disruption to ongoing strategic initiatives if Mantle Ridge succeeds
• Risk of project disruption that could cost 'billions of dollars' according to the company

Insights

Corporate Governance Expert

This proxy battle between Air Products and activist investor Mantle Ridge represents a pivotal moment for APD's corporate governance and strategic direction. The core dispute centers on the CEO succession plan and board composition, with significant implications for APD's $65B market cap business.

The company's defensive posture against ISS's recommendation signals serious concerns about potential disruption to their two-pillar growth strategy. The contrast between APD's planned orderly CEO transition by March 31st versus Mantle Ridge's more aggressive approach of immediate leadership change presents divergent paths for corporate stability. Historical precedents suggest that rushed CEO transitions in capital-intensive industries often lead to strategic discontinuity and project delays.

Of particular note is the emphasis on the NEOM project in Saudi Arabia and Darrow project in Louisiana - both critical components of APD's clean hydrogen strategy. Any disruption to these initiatives could materially impact APD's competitive position in the emerging hydrogen economy.

Industrial Gas Market Analyst

The proxy contest fundamentally challenges APD's capital allocation strategy in the industrial gas sector. The tension lies between maintaining stable growth in the core industrial gas business while pursuing ambitious clean hydrogen projects. The market implications are profound - APD currently holds a strong position in traditional industrial gases, but the clean hydrogen investments represent a calculated bet on future energy transitions.

Mantle Ridge's apparent lack of an alternative strategic plan is concerning. In the industrial gas sector, where capital projects have decades-long horizons, strategic continuity is crucial. The potential disruption to ongoing projects, particularly the NEOM and Darrow initiatives, could create significant execution risks. For context, these projects typically require billions in capital investment and rely heavily on long-term customer commitments.

Activist Investing Strategist

This proxy contest exhibits classic elements of activist intervention in capital-intensive industries, but with unique complexities. Mantle Ridge's track record at other companies like CSX and Dollar Tree becomes particularly relevant when evaluating their capability to guide a complex industrial operation like APD. The lack of a detailed alternative strategy is a significant red flag.

The market is likely to experience increased volatility as we approach the January 23rd vote. The criticism of ISS's recommendation underscores the high stakes involved. Historical patterns suggest that successful activist campaigns in industrial companies often lead to short-term cost-cutting measures that can compromise long-term strategic investments. The timing of this contest is particularly critical given the industry's current transition toward clean hydrogen infrastructure.

Strongly Disagrees with ISS' Opinion Published Today

Urges Shareholders to Vote "FOR" ONLY Air Products' Nominees on the WHITE Proxy Card

LEHIGH VALLEY, Pa., Jan. 13, 2025 /PRNewswire/ -- Air Products' (NYSE: APD) Board of Directors today sent a letter to shareholders in connection with its upcoming 2025 Annual Meeting of Shareholders (the "Annual Meeting"), which will be held at 8:30 a.m. U.S. Eastern Time on January 23, 2025. All Air Products shareholders of record as of the close of business on November 27, 2024, will be entitled to vote at the Annual Meeting.

Air Products urges shareholders to vote "FOR" ONLY Air Products' nominees on the WHITE proxy card and warns investors that following ISS' voting recommendation could have a serious negative impact on the Company and their investment, as described in the letter to shareholders.

The full text of the letter to shareholders follows:

AIR PRODUCTS SHAREHOLDERS HAVE TWO CHOICES TO CONSIDER

ACHIEVE STABILITY, GROWTH, AND LONG-TERM VALUE CREATION WITH AIR PRODUCTS' FIT-FOR-PURPOSE BOARD

OR

RISK LIMITED GROWTH, LONG-TERM VALUE DESTRUCTION, AND AN UNCERTAIN FUTURE WITH MANTLE RIDGE'S NOMINEES WHO HAVE STALE OR INFERIOR EXPERIENCE AND LACK ANY GO-FORWARD PLAN

Dear Fellow Air Products Shareholders:

On January 23^rd, you will cast your vote to determine the future of your Company. On the ballot you can make one of two choices.

1. Supporting the Air Products nominees, who will continue to oversee performance of the base business, a carefully developed and credible two-pillar growth strategy to maximize long-term shareholder value, and a smooth, orderly and deliberate CEO transition.
   
   
2. On the other hand, supporting any of Mantle Ridge's nominees, who have offered no alternative plan, would remove valuable expertise from the Board and could create significant instability as to the future leadership or strategic direction of the Company.

The stakes could not be higher. We think the choice is clear:

	Choice #1: Supporting Air Products' Superior Nominees   Growth, Long-term Value Creation, and Stability		Choice #2: Supporting Mantle Ridge's Substandard Slate   Risk of Limited Growth, Long-term Value Destruction, and an Uncertain Future
•	Your Board is conducting a smooth, orderly and deliberate CEO transition that will ensure the highest quality candidate to be named President by March 31. At that time, we will also provide a definitive succession timeline for when this leader will become the next Air Products CEO.	X	Mantle Ridge has threatened to immediately fire the CEO and leadership team and replace it with an unqualified CEO candidate who needs to be paired with Dennis Reilley, has no public company chief executive experience, and who was passed over as CEO at his previous employer.
•	Focus to achieve long term, sustainable, superior shareholder value creation.	X	Prioritizing short-term opportunism and unnecessary disruption instead of innovation and investing for the future.
•	Continued performance of our core industrial gas business.	X	Zero plan from Mantle Ridge.
•	Continued execution of our clean hydrogen strategy: we believe that in the coming 6-12 months we will have our NEOM project in Saudi Arabia fully committed as well as an anchor offtake customer and an equity partner for our Darrow project in Louisiana.	X	Zero plan from Mantle Ridge. If Mantle Ridge is successful, Air Products' new management team would be faced with either (I) cutting off the clean hydrogen strategy pursued across the industry with no ideas or path to continued growth of an industrial gas platform or (II) attempting to continue our path of executing long-term offtakes with global corporate giants and sovereign-owned entities with an inexperienced, first-time public company CEO.
•   •	The Board is currently made up of experienced directors with high integrity, track records of success, and relevant experience. Our two new nominees, Bhavesh V. ("Bob") Patel and Alfred Stern, bring international and public company CEO experience and fresh perspective to successfully oversee the execution of our two-pillar growth strategy.	X	Mantle Ridge's subpar nominees are inferior to the backgrounds of Air Products' proposed board. • Dennis Reilley has very stale operating experience, having last served as an executive 18 years ago, and deeply troubling questions as to whether he repeatedly leaked confidential information to a neighbor from three different boards where he was a director. • Paul Hilal has no industry experience and a track record of value destruction and mismanaged succession processes at every one of Mantle Ridge's public activist campaigns – Aramark, CSX and Dollar Tree. • Andrew Evans' lacks international experience and oversaw the finances of the Vogtle nuclear power plant expansion project as CFO of Southern Company, which was plagued by construction delays and cost overruns – the project was seven years late and $17 billion over budget. • Tracy McKibben, whose experience stems largely from serving as an investor and consultant at what appears to be a small firm she founded, served as a director of Imation (now known as Glassbridge). Share prices ranged from a high of $43.60 when Ms. McKibben joined the board, to a low of $0.75, with Imation ultimately being delisted from the New York Stock Exchange.

If Mantle Ridge were to unseat our CEO, Lead Independent Director or two other highly qualified directors from your Board, it could create extraordinary confusion among many of our stakeholders as to the future direction and leadership of the Company, and put our long-term performance at risk. Allowing Mantle Ridge to unwind our capital projects would needlessly cost shareholders billions of dollars, rather than trusting your Board – who with the addition of our two new nominees at our 2025 Annual Meeting will have six of nine directors appointed in the past five years if elected – to continue to sign off-take agreements and undertake an orderly CEO transition. 

There is no middle ground – appointing any of Mantle Ridge's nominees could impede our ability to deliver you the long-term shareholder value that the Company has been positioning for. Protect your investment and the future of the Company by voting the WHITE proxy card "FOR" ONLY Air Products' full slate of director nominees. Please discard any blue proxy card you may receive from Mantle Ridge.

Thank you for your continued support.

Sincerely,

The Air Products Board of Directors

For more information regarding our Board nominees and strategy, please visit: www.voteairproducts.com.

YOUR VOTE IS IMPORTANT. Whether or not you plan to virtually attend the 2025 Annual Meeting, please take a few minutes now to vote by Internet or by telephone by following the instructions on the WHITE proxy card, or to sign, date and return the enclosed WHITE proxy card in the enclosed postage-paid envelope provided. Regardless of the number of Company shares you own, your presence by proxy is helpful to establish a quorum and your vote is important.

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ONLY AIR PRODUCTS' NINE NOMINEES AND PROPOSALS ON THE ENCLOSED WHITE PROXY CARD.

If you have any questions or require any assistance with voting your shares, please call the Company's proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Shareholders: 1 (877) 750-0537 (toll-free from the U.S. and Canada)

or +1 (412) 232-3651 (from other countries)

About Air Products

Air Products (NYSE:APD) is a world-leading industrial gases company in operation for over 80 years focused on serving energy, environmental, and emerging markets and generating a cleaner future. The Company supplies essential industrial gases, related equipment and applications expertise to customers in dozens of industries, including refining, chemicals, metals, electronics, manufacturing, medical and food. As the leading global supplier of hydrogen, Air Products also develops, engineers, builds, owns and operates some of the world's largest clean hydrogen projects, supporting the transition to low- and zero-carbon energy in the industrial and heavy-duty transportation sectors. Through its sale of equipment businesses, the Company also provides turbomachinery, membrane systems and cryogenic containers globally.

Air Products had fiscal 2024 sales of $12.1 billion from operations in approximately 50 countries and has a current market capitalization of about $65 billion. Approximately 23,000 passionate, talented and committed employees from diverse backgrounds are driven by Air Products' higher purpose to create innovative solutions that benefit the environment, enhance sustainability and reimagine what's possible to address the challenges facing customers, communities, and the world. For more information, visit airproducts.com or follow us on LinkedIn, X, Facebook or Instagram.

Non-GAAP Financial Measures

This communication contains certain financial measures that are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), including adjusted EPS and adjusted EBITDA margin. On our website, at investors.airproducts.com, we have included reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP. Management believes these non-GAAP financial measures provide investors, potential investors, securities analysts, and others with useful information to evaluate our business because such measures, when viewed together with our GAAP disclosures, provide a more complete understanding of the factors and trends affecting our business. The non-GAAP financial measures supplement our GAAP disclosures and are not meant to be considered in isolation or as a substitute for the most directly comparable measures prepared in accordance with GAAP. These measures may not be comparable to similarly titled measures used by other companies.

Forward-Looking Statements

This communication contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's expectations and assumptions as of the date of this communication and are not guarantees of future performance. While forward-looking statements are made in good faith and based on assumptions, expectations and projections that management believes are reasonable based on currently available information, actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors, including the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 and other factors disclosed in our filings with the Securities and Exchange Commission. Except as required by law, we disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in the assumptions, beliefs or expectations or any change in events, conditions or circumstances upon which any such forward-looking statements are based.

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SOURCE Air Products

FAQ

When is Air Products (APD) 2025 Annual Meeting scheduled?

Air Products' 2025 Annual Meeting is scheduled for January 23, 2025, at 8:30 a.m. U.S. Eastern Time.

What is the deadline for Air Products (APD) CEO transition plan?

Air Products plans to name a new President by March 31, 2025, with a definitive succession timeline for CEO transition to be announced at that time.

What are the major projects mentioned in Air Products (APD) shareholder letter?

The letter mentions two major projects: the NEOM project in Saudi Arabia and the Darrow project in Louisiana, both expected to have significant developments in the next 6-12 months.

How many new directors will Air Products (APD) add to its board?

Air Products is adding two new nominees, Bhavesh V. Patel and Alfred Stern, bringing the total to six new directors appointed in the past five years if elected.

What is the proxy voting recommendation from Air Products (APD) board?

The Air Products board unanimously recommends shareholders vote 'FOR' only Air Products' nine nominees on the WHITE proxy card.