Three Airgas directors threatened to sue the company if they were not allowed to retain their own financial adviser to help them consider a takeover offer by Air Products & Chemicals, according to a letter made public on Monday.

The development further highlights cracks in the Airgas board as the industrial gas supplier tries to fend off a $5.9 billion takeover offer.
The Airgas directors, who were backed by Air Products in their bid to join the board earlier this year, believe their views have been misrepresented by the company they help run.

"Your recent tactics of needlessly postponing board meetings, refusing to engage with us, and putting off our repeated requests to retain outside advisers are not in the best interests of Airgas or its shareholders," directors John Clancey, Robert Lumpkins and Ted Miller wrote in a letter to Airgas Chairman John van Roden on Dec. 7 that was made public on Monday.

The trio said that unless Airgas allowed them to hire outside financial advisors, they would notify a Delaware court and initiate "litigation to enforce our rights."

Airgas said it had agreed to hire Credit Suisse as a third investment bank to advise its directors.

Airgas' van Roden also said he had tried to hold a board meeting on Dec. 5 to consider a sweetened offer from Air Products, but Clancey, Lumpkins and Miller were not "ultimately able to commit to attend" in person.

"All of the statements that Airgas has made to the court and publicly have been accurate, and your suggestion to the contrary is simply not correct," van Roden wrote in a response the company also released on Monday.

The division on the Airgas board may end up being a positive, Columbia Law School professor John Coffee said.

"I don't think there's anything wrong with directors being dissident and disagreeing with others," Coffee said. "The fact that one group disagrees with the other ... that's exactly where the rubber meets the road."

The three directors released a statement through an Airgas spokesman on Friday, after the exchange of letters took place, denying division on the board.

"The board is functioning effectively in the discharge of its duties to Airgas stockholders," the directors said in the statement.

Poison Pill
Delaware Chancellor William Chandler is considering a challenge to Airgas' shareholder rights plan, commonly known as a "poison pill," which effectively lets shareholders increase the total share count at a discount to ward off a potential acquisition.

His ruling is expected soon, though last week he asked both companies for additional information to make his decision.

"All of these allegations and letters are somewhat irrelevant to the issue of the pill," said Morton Pierce, co-chair of law firm Dewey & LeBoeuf's mergers and acquisitions group. "One could argue that the fact that the Air Products people raised their offer shows that the pill is still effective."

Airgas had previously quoted the letters in a legal filing, disclosing that the board members had challenged company statements that that board was unanimous in setting a $78-per-share floor for a deal.

Air Products has been trying to buy rival Airgas since February, with private negotiations going back to the fall of 2009.