Airgas stockholders, not the company itself, should be allowed to decide the fate of a $5.5 billion takeover bid, top executives of larger rival Air Products told a court on Monday.

John McGlade, Air Products' chief executive, testified that Airgas' anti-takeover defenses stood in the way of his company's desire to merge the two industrial gas suppliers. Airgas refused to come to the negotiating table, another Air Products executive testified.

"At this point in time the way to figure this out is to allow them (shareholders) to tender their shares and we can't do that," said McGlade, referring to a "poison pill" that forces a shareholder to obtain prior approval before acquiring more than 15% of Airgas stock.

The companies have sued each other in Delaware Chancery Court. A third lawsuit brought by Airgas shareholders also is being heard by the court.

At stake is a leading position in North America for gases such as argon, helium and nitrogen, which are used in hospitals, welding and refrigeration. A deal would twin Air Products' gas supplies and international reach with Airgas' sales force, giving the combined company more ability to raise prices while cutting costs.

The judge, William Chandler, sealed the courtroom twice Monday morning while Air Products' Chief Financial Officer Paul Huck testified. He sealed the courtroom again in the afternoon.

The move cut off a live video stream of the trial and forced into the hallway a crowd of lawyers who were not part of the immediate litigation teams, as well as analysts and journalists for about 45 minutes. About 90 minutes of Huck's morning testimony was open to the public.

Transparent Or Coercive?
The case is expected to highlight common anti-takeover tactics, including poison pill provisions and staggered board elections, and whether they are valid.

Huck testified that Air Products was unwilling to raise its price unless Airgas came to the negotiating table. He said that Airgas had refused to talk to his company.

On cross examination by Airgas attorneys, Huck said Air Products was concerned about having to continually raise its offer in the face of no other bids. He said the company did not want to reveal its "reserve price," or the maximum bid its board would allow management to make.

"We were tired of it," said Huck, referring to the pressure to raise the bid. "If the (Airgas) board had came out and talked to Air Products they might have gotten close to the reserve price," he said.

Huck and McGlade also said they were "transparent," not coercive as critics contended, in successfully persuading Airgas shareholders to elect Air Products candidates to the Airgas board last month.

Air Products had threatened to withdraw its $65.50 tender offer if the directors were not elected.

"If shareholders didn't want to support our nominees," said McGlade, "we needed to move on and we were prepared to do that."

The shareholders also approved bringing forward Airgas' annual meeting by nine months to January, when the shareholders could approve three more Air Products nominees, giving the company de facto control of the Airgas board.

Airgas is expected to present its case later in the week. It has argued that the annual meeting should not be held twice in the same fiscal year, which ends in March, and that the change in the date of the meeting was approved by less than the required two-thirds of Airgas shares.

Air Products, based in Allentown, Pa., and Airgas, based in Radnor, Pa., are both incorporated in Delaware. The state's corporate law governs about half of the U.S.'s largest companies and the Court of Chancery has settled numerous high-profile corporate disputes.