Airgas Inc. |ARG
Air Products and Chemicals Inc. |APD

Deal value $5.3 billion

Spread 07/12/10 -$1.35, or -2.1%

Air Products and Chemicals Inc. increased its hostile offer for Airgas Inc., but the market is looking for more before the standoff approaches a September referendum of Airgas shareholders.

Air Products upped its hostile takeover offer July 8 to $63.50 per share, from the $60 per share bid launched publicly in early February. That offer followed a $62 per share private approach that the Airgas board snubbed. The $60 per share offer was also rejected.

The new bid follows Airgas' setting of a July 19 record date for its annual meeting, which will be held before Sept. 17. At that meeting, Air Products proposes that shareholders replace three members of the three-class staggered Airgas board. It also wants shareholders to vote to alter future annual meeting dates so that the next meeting will occur in January. If shareholders approve both proposals, Air Products could control the Airgas board by the beginning of 2011.

The increased offer is not surprising and seems timed to encourage risk arbitrage money to pile into the situation before the record date. The tender offer by Air Products expires Aug. 13, and it could be a referendum of sorts regarding the offer. But Air Products has a poison pill, so the tender result itself is not that significant. The $1.50 bump was not expected to alter the Airgas recommendation, given that the board rejected $62 per share when the economic climate was more dire.

Time is still on Airgas' side, an arb says. The $62 per share offer was made when the industry outlook was worse than today, he says. Airgas shareholders might back the dissident slate in September and even the proposal to alter the annual meeting date, he says.

But that does not mean that shareholders would support a second slate of directors, and the change of the annual meeting date could be subject to litigation that would push out any vote on the second class of directors to at least March, he says.

By then, industry fundamentals might improve further. Competitor Praxair Inc. has also made it clear to the market that it is weighing its options regarding the bidding process.

Alcon Inc. |ACL
Novartis AG |NVS

Deal value $41.5 billion

Spread 07/12/10 -$14.39, or -9.4%

Alcon Inc.'s independent committee established a trust in early July for litigation relating to the proposed $41.5 billion acquisition of the eye-care company by Novartis AG.

The move is bullish in terms of the committee's defensive stance in favor of a sweeter deal for minority shareholders. The irrevocable trust is funded with $50 million -- $10 million for litigation expenses and the rest for a bond required to seek injunctive relief. The trust intends to ensure the committee can fund litigation once Novartis gets control of the board, which could occur in August.

Novartis already owns 25% of Alcon, and in January the company exercised an option to buy Nestlé SA's 52% stake for $180 cash per share. That deal requires regulatory approval.

On June 30, Novartis nominated five directors to the Alcon board to replace the seats held by Nestlé. The Alcon annual meeting to vote on those positions is Aug. 16. Any director vote will be conditioned on the completion of Novartis' purchase of the Nestlé shares.

Novartis intends to buy in Alcon shares through a stock swap of 2.8 Novartis shares for each share of Alcon, or about $138.50 per share. The parties are arguing between themselves whether, under Swiss law, Novartis can control Alcon once it holds the Nestlé stake.