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Wall Street Journal, September 15, 2010 article


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Big Boardroom Battles Loom



After a lull in deal activity, several companies now find themselves facing showdowns with investors in the coming weeks.

Up first is Airgas Inc., whose shareholders are expected Wednesday to approve three directors nominated by Air Products & Chemicals Inc. as part of a $5.48 billion hostile bid for Airgas, people familiar with the matter say.

Other battles loom at Barnes & Noble Inc., Casey's General Stores Inc. and Dollar Thrifty Automotive Group Inc.

In many ways, this is a happenstance of scheduling, which put four votes in the space of three weeks. But the fights show that certain players are willing to go the distance to get what they want, which requires both aggressiveness and patience.

"It's like a rugby scrum, and whoever gets the ball will be the one who wants it more," says Mark Gulley, an analyst at Soleil Securities who has been following the Airgas-Air Products situation.

At Airgas's shareholder meeting Wednesday, the most closely watched vote will involve another proposal from Air Products: moving Airgas's next annual meeting, now scheduled for September 2011, up to January. Air Products believes the move will help it install a majority of directors on the Airgas board. Both parties are expecting a close vote, people familiar with the matter say.

With dueling PR campaigns, both companies are intensely courting arbitrageurs, who make up an estimated 40% of Airgas shareholders. Arbitrageurs play in the stocks of takeover targets, hoping to profit on small shifts in stock prices as deals near completion or falter.

Air Products has said it will withdraw its offer if Airgas shareholders reject Air Products' proposals. Airgas has said it will buy back shares in an effort to appease investors worried that Airgas's share price will drop if Air Products withdraws.

Airgas has also said that if the January meeting proposal is rejected, it will hold a special meeting next June to elect more directors and will explore alternatives to enhance shareholder value.

By waiting until June, people familiar with the matter say, the company wants to buy time for other possible bidders, such as Germany's Linde Group AG, to step in.

Even if Airgas shareholders approve a January 2011 meeting, the matter could eventually be settled by the courts, because Airgas has said it will try to invalidate that vote if it is approved. Airgas says the proposal goes against Delaware corporate law and its own bylaws.

In another proxy contest that is growing increasingly bitter, billionaire investor Ronald Burkle and Barnes & Noble have presented dueling director slates for the company's shareholder meeting on Sept. 28.

The proxy fight pits Mr. Burkle, one of the director nominees, against Leonard Riggio, the company's founder and largest shareholder, who has said he is considering taking Barnes & Noble private himself.

On Monday, Mr. Burkle's investment arm, Yucaipa Cos., sent a letter to Barnes & Noble shareholders titled "Enough With the Fiction."

"Do you think [Mr. Riggio] will give up the opportunity for more personal financial benefits he and his family have received from the years of related party transactions, unless he believes he can buy the company at a lowball price?" Yucaipa said in its letter.

Barnes & Noble has also made scathing remarks about Mr. Burkle, saying he is trying to steal the company and has an "undistinguished track record" of service on boards.

"In some instances, Mr. Burkle has sought to implement large-scale strategic changes at companies that later filed for bankruptcy or encountered severe financial distress," Barnes & Noble said in a letter Monday to shareholders.

With the parties siding with Mr. Burkle or Mr. Riggio each owning around one third of the company's shares, the deciding vote probably lies with institutional shareholders and index funds. That means a recommendation by influential proxy advisory firm Institutional Shareholder Services Inc. will be crucial, and both sides have been lobbying the firm in recent weeks.

Canadian convenience-store chain Alimentation Couche-Tard's efforts to replace the eight-member board of Casey's General Stores next week took an unexpected turn after 7-Eleven Inc. offered a proposal to acquire Casey's for $1.51 billion. The 7-Eleven offer on Sept. 2 topped Couche-Tard's hostile bid of $1.45 billion.

On Friday, Couche-Tard asked Casey's to delay the Sept. 23 shareholder meeting and allow it to have the same opportunity as 7-Eleven to negotiate with Casey's on a possible sale. Couche-Tard also questioned the timing of the 7-Eleven offer, saying "it appears to be an attempt to distract your shareholders."

On Tuesday, Casey's rejected the meeting-delay request and said Couche-Tard's comments on the 7-Eleven offer are "unfounded and absurd."

Avis Budget Group Inc. is also running up against changing bids after Hertz Global Holdings Inc. raised its offer for Dollar Thrifty Automotive Group to more than $1.5 billion.

Dollar shareholders were scheduled to vote on Hertz's original bid of $1.1 billion on Thursday, but the meeting was delayed until Sept. 30 to give investors time to assess the new Hertz offer.

On Sept. 2, Avis raised the cash portion of its cash-and-stock offer, bringing its bid to more than $1.3 billion. The new Hertz offer may make it tough for Avis to come up with a counter bid, people familiar with the matter say. But a final decision has not yet been made, these people add.

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