Thursday, September 16, 2010
In yesterday's Airgas shareholders' meeting, Air Products put forward a bylaw amendment (you can find the text of the amendment here, proposal 5 on page 65) that would change the date of the annual meeting to January, 2011 effectively short-circuiting the staggered board/poison pill defense. As I said yesterday, it's intriguing. Now, that bylaw amendment won a bare majority of shareholders present and voting. Airgas' response was to claim that since the proposed amendment did not receive a supermajority of votes from the outstanding shares that the bylaw did not pass. That's odd. I pulled the 1995 Airgas certificate of incorporation and went straight the to language on amendments and this is what it says:
6. By-Law Amendments. The Board of Directors shall have power to make, alter, amend and repeal the By-Laws (except so far as the By-Laws adopted by the stockholders shall otherwise provide.) Any By-Laws made by the Directors under the powers conferred hereby may be altered, amended or repealed by the Directors or by the stockholders. Notwithstanding the foregoing and anything contained in this certificate of incorporation to the contrary, Article III of the By-Laws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of at least 67% of the voting power of all the shares of the Corporation entitled to vote generally in the election of Directors, voting together as a single class.
Looks about right. I suspect if Air Products is unable to 67% of the outstanding shares that the bylaw amendment goes down, notwithstanding the fact that it may have gotten a majority of the quorum in yesterday's meeting. That will leave Air Products with one-third of the board and hanging around until the next annual meeting. That's a mighty uncomfortable position to be in unless it can convince a Delaware court to order the Airgas board to pull the pill. We'll see.
Correction: Strike that, reverse it. The Deal Professor is obviously correct on this point. As has been also pointed out to me by a helpful reader, the "Article III" referenced in the bylaw amendment provision of the certificate (above) points back to bylaw provisions relating to "Directors". The annual meeting is covered under "Article II" of the bylaws (from the bylaws) and they are subject to the following amendment provision:
Article IX, Section 1. Amendments of By-Laws.