The Airgas Decision: Directors Can Still Just Say No | White & Case LLP International Law Firm, Global Law Practice
The Airgas Decision: Directors Can Still Just Say No

The Airgas Decision: Directors Can Still Just Say No

A debate has raged about the proper limits of a poison pill as a defense to a non-coercive, all-cash offer when a corporate board has determined the offer price to be inadequate. Shareholder rights advocates have argued that in such circumstances, if all relevant information is disclosed, shareholders should be allowed to accept or reject the offer. The Delaware Chancery Court in Air Prod. & Chem., Inc. v. Airgas, Inc., et al, decided this debate in favor of Airgas' Board based on the facts of the case. In a sprawling opinion, Vice Chancellor Chandler determined that a board of directors that has acted in good faith and has a reasonable factual basis for believing a non-coercive, all-cash tender offer is inadequately priced may maintain a poison pill as a valid defense against the offer. The Court emphasized that its ruling did not validate the use of a poison pill as a "just say never" defense in all circumstances, while recognizing that it did "bring us one step closer to that result." Vice Chancellor Chandler signaled his personal discomfort with the discretion granted corporate boards to resist non-coercive tender offers under existing Delaware judicial precedent, but felt constrained by that precedent to issue his decision in favor of Airgas' Board, effectively ending the Air Products takeover effort.

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