Multi-strategy hedge fund D.E. Shaw revealed on Thursday it had amassed a roughly $1 billion stake in industrial gas giant Air Products and Chemicals, the second activist stake at the $71 billion company.
D.E. Shaw, one of the largest hedge funds in the world by assets, said in letters made public Thursday that its efforts to engage privately with the company had been largely rebuffed and marked by “an apparent lack of urgency.”
The investor plans to nominate three directors to the company’s board, people familiar with the matter told said. The potential challenge would come alongside another activist fund, Paul Hilal’s Mantle Ridge. Mantle Ridge has a similarly sized stake and, like D.E. Shaw, is seeking a clear succession plan for Air Product’s CEO, 80-year-old Seifi Ghasemi.
Scott Sutton, the former CEO of Olin, is one of D.E. Shaw’s nominees and is seen as a potential CEO candidate, those people said.
D.E. Shaw also took aim at how Air Products has structured some of its largest deals. Large-scale infrastructure projects typically include “offtake agreements,” which effectively guarantee a certain amount of cash flow from an investment. D.E. Shaw said in its presentation to Air Products’ board that the company has begun significant hydrogen projects costing many billions of dollars, without any guaranteed cash flow.
D.E. Shaw believes this departure from the norm for both the business and the industry is one of the factors driving Air Products’ underperformance compared to its historic average and peers.
While D.E. Shaw is presently only seeking to install three directors, Hilal’s Mantle Ridge intends to mount a proxy fight for control of the board, the people said.
It is a strategy that CEO Ghasemi has defended, despite the success that competitors like Linde have had pursuing less-riskier projects with offtake agreements.
D.E. Shaw, like Mantle Ridge and many analysts, has also identified the lack of succession planning and generous contract given to CEO Ghasemi. The activist in its letters and presentation raised questions about whether the company’s board was adequately managing the succession process.
Air Products declined to comment on either activist engagement.
