NEW YORK - Investment firm Mantle Ridge LP is advocating for significant changes to the board of directors at Air Products and Chemicals, Inc. (NYSE: NYSE:APD), citing persistent underperformance and governance issues. Mantle Ridge, which holds approximately $1.3 billion in Air Products shares of the company's $68.2 billion market capitalization, has proposed four new director nominees in a bid to drive a strategic and leadership transformation at the industrial gas giant. According to InvestingPro data, APD currently trades at a P/E ratio of 17.9, with several indicators suggesting the stock may be overvalued relative to its fundamentals.
The firm's move comes after a comprehensive presentation released Tuesday, December 17, 2024, which outlines a series of alleged failings by the current board, including poor succession planning for the company's CEO, Seifi Ghasemi, and missteps in capital allocation. Recent InvestingPro data shows concerning trends, including a 3.96% revenue decline and an 8% return on invested capital in the last twelve months. According to Mantle Ridge, these issues have led to industry-worst returns on invested capital and lagging shareholder value compared to peers such as Linde (NYSE:LIN) and Air Liquide (OTC:AIQUY).
Mantle Ridge's plan, detailed in the presentation, calls for a shareholder-led board reconstitution and the establishment of a bona fide CEO succession plan. The firm believes that with better stewardship and leadership, Air Products could be worth over $425 per share, with potential for double-digit annual growth.
The proposed director nominees from Mantle Ridge – Andrew Evans, Paul Hilal, Tracy McKibben, and Dennis Reilley – are said to possess a mix of expertise in industrial gas, heavy industry, capital allocation, and energy transition. Mantle Ridge has also suggested a leadership "dream team" with Eduardo Menezes and Dennis Reilley to address the underlying issues at Air Products.
The firm is urging shareholders to vote for its director nominees using the BLUE Proxy Card and to withhold votes from the current company nominees, including Charles Cogut, Lisa A. Davis, Seifi Ghasemi, and Edward L. Monser. This proxy battle is set to culminate at Air Products' 2025 Annual Meeting of Shareholders. Despite these challenges, InvestingPro analysis highlights APD's strong dividend history, with 41 consecutive years of increases and a current yield of 2.31%. Analysts maintain a moderate buy consensus with price targets ranging from $290 to $395 per share.
Mantle Ridge's efforts and presentation can be viewed at www.RefreshingAirProducts.com. This push for change is based on a press release statement issued by the firm.
In other recent news, Air Products reported a 13% year-over-year increase in adjusted earnings per share for Q4 2024, aligning with their guidance. For fiscal year 2025, the company anticipates an EPS growth of 6% to 9%, despite the sale of its LNG business to Honeywell (NASDAQ:HON). Analysts at Mizuho (NYSE:MFG) and BMO Capital have maintained their Outperform ratings on Air Products, adjusting their price targets to $385 and $350 respectively, following these strong Q4 results and fiscal year guidance.
In governance developments, activist hedge fund Mantle Ridge LP has proposed a restructuring of the Air Products' board, reducing its nominees from five to four for the company's 2025 Annual Meeting. In response, Air Products' board has unanimously recommended shareholders vote for its slate of director nominees on the WHITE proxy card, arguing that Mantle Ridge's nominees could potentially impede the company's growth and succession planning.
Air Products continues to focus on the burgeoning clean hydrogen market, with multiple projects in progress, including a 15-year contract to provide TotalEnergies (EPA:TTEF) with green hydrogen starting in 2030. The company's construction-in-progress currently stands at $11 billion, signaling a significant increase in ongoing projects. These are recent developments in the company's operations.
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