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Hedge Fund D.E. Shaw Takes Interest in Air Products
Globally renowned hedge fund D.E. Shaw announced on Thursday that it has accumulated approximately $1 billion worth of shares in the American industrial gas giant Air Products and Chemicals, becoming the company's second-largest activist investor.
Activist investors are those who, after purchasing a significant number of a company's shares, actively engage in the company's governance and operational decision-making. D.E. Shaw, one of the world's largest hedge funds by asset size, has attempted private communication with Air Products but was rebuffed.
According to insiders, D.E. Shaw plans to nominate three directors, including former Olin CEO Scott Sutton, to join Air Products' board of directors. This move is supported by another activist fund, Mantle Ridge, whose shared goal is to push the company to establish a clear succession plan for the current 80-year-old CEO, Seifi Ghasemi, who is one of the oldest CEOs among S&P 500 companies.
D.E. Shaw has expressed dissatisfaction with Air Products' approach to some significant transactions. Typically, large infrastructure projects include "take-or-pay contracts," which act as a form of insurance for investments, ensuring stable earnings for project investors. However, D.E. Shaw has pointed out that Air Products has initiated hydrogen projects costing billions of dollars without "take-or-pay contracts."
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D.E. Shaw believes that this unconventional practice may be one of the reasons why Air Products' performance has lagged behind historical averages and other peer companies. Meanwhile, despite competitors like Linde achieving success with low-risk projects that use take-or-pay contracts, Air Products' CEO Ghasemi continues to adhere to his own strategy.
Furthermore, the D.E. Shaw fund, the Mantle Ridge fund, and many analysts feel that the company has offered CEO Ghasemi a contract that is too generous and has not adequately planned for his successor upon retirement. D.E. Shaw has questioned in correspondence whether the company's board of directors is genuinely addressing the issue of CEO succession.
Although D.E. Shaw currently only seeks to place three members on the board, the intentions of the Mantle Ridge fund are more aggressive; they aim to control the entire board through a proxy fight.
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