Air Products and Chemicals, Inc., lost two groundbreaking battles during the hostile takeover bid for rival specialty gas maker Airgas, Inc., that it launched in October 2009. The first was a direct attack on the poison pill: The bidder argued that the vaunted takeover defense strategy, invented by Martin Lipton of Wachtell, Lipton, Rosen & Katz, can be used for only a limited time frame. Foiling this attack generated splashy headlines—”Wachtell Saves Marty’s Baby”—but it was always a bit of a sideshow because Wachtell, which defended the target Airgas on every front, never thought that the result was in doubt.
Instead, the key to the outcome of the takeover bid was Air Products’s sneakier bylaw strategy. Advised by Cravath, Swaine & Moore, the bidder proposed a bylaw allowing Airgas shareholders to hold two annual meetings in the space of four months. Arcane though it seems, approving such a bylaw would be just as devastating for targets like Airgas. It would allow shareholders favoring the Air Products bid to quickly gain control of Airgas’s board—by voting in two new blocs of directors inclined to support the deal. Wachtell’s Daniel Neff—who as Airgas’s chief corporate adviser supervised his partners’ litigation strategy—knew that the bylaw battle would be desperately close.
