The Delaware Chancery Court upheld Airgas, Inc.’s poison pill defense in a ruling on Feb. 15, 2011 (PDF).  The Airgas poison pill had blocked a $5.9 billion hostile bid from Air Products & Chemicals Inc., which dropped the bid following the ruling.

As reported by The Wall Street Journal today, the Delaware court ruled that the “power to defeat an inadequate hostile tender offer ultimately lies with the board of directors.”  The court held that the poison pill was a reasonable response to the Air Products’ takeover attempt.  The key is that the court found the Airgas board of directors to be acting in good faith and complying with its fiduciary duties.

Bloomberg Businessweek reported today that the Air Products’ offer, which was made public on Feb. 4, 2010, was the eighth-longest-running U.S. hostile takeover bid since Bloomberg started tracking takeover offers.  Airgas subsequently announced a $300 million share buyback.

OUR TAKE:  This was an anticipated decision because poison pill cases are typically settled or dropped before the cases can be decided.  The Chancery Court has reinforced the viability of a poison pill as an appropriate response to a hostile bid that a board of directors in good faith believes is inadequate. 

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